Filecoin raises $257 million and will unlock unused storage in data centers

Blockchain data storage network Filecoin has officially completed its initial coin offering (ICO), raising more than $257 million over a month of activity.

The internet is in the middle of a revolution: centralized proprietary services are being replaced with decentralized open ones; trusted parties replaced with verifiable computation; brittle location addresses replaced with resilient content addresses; inefficient monolithic services replaced with peer-to-peer algorithmic markets. Bitcoin, Ethereum, and other blockchain networks have proven the utility of decentralized transaction ledgers. These public ledgers process sophisticated smart contract applications and transact crypto-assets worth tens of billions of dollars. These systems are the first instances of internetwide Open Services, where participants form a decentralized network providing useful services for pay, with no central management or trusted parties. IPFS has proven the utility of content-addressing by decentralizing the web itself, serving billions of files used across a global peer-to-peer network. It liberates data from silos, survives network partitions, works offline, routes around censorship, and gives permanence to digital information.

Filecoin is a decentralized storage network that turns cloud storage into an algorithmic market. The market runs on a blockchain with a native protocol token (also called “Filecoin”), which miners earn by providing storage to clients. Conversely, clients spend Filecoin hiring miners to store or distribute data. As with Bitcoin, Filecoin miners compete to mine blocks with sizable rewards, but Filecoin mining power is proportional to active storage, which directly provides a useful service to clients (unlike Bitcoin mining, whose usefulness is limited to maintaining blockchain consensus). This creates a powerful incentive for miners to amass as much storage as they can, and rent it out to clients. The protocol weaves these amassed resources into a self-healing storage network that anybody in the world can rely on. The network achieves robustness by replicating and dispersing content, while automatically detecting and repairing replica failures. Clients can select replication parameters to protect against different threat models. The protocol’s cloud storage network also provides security, as content is encrypted end-to-end at the client, while storage providers do not have access to decryption keys. Filecoin works as an incentive layer on top of IPFS [1], which can provide storage infrastructure for any data. It is especially useful for decentralizing data, building and running distributed applications, and implementing smart contracts.

This work:
(a) Introduces the Filecoin Network, gives an overview of the protocol, and walks through several components in detail.
(b) Formalizes decentralized storage network (DSN) schemes and their properties, then constructs Filecoin as a DSN.
(c) Introduces a novel class of proof-of-storage schemes called proof-of-replication, which allows proving that any replica of data is stored in physically independent storage.
(d) Introduces a novel useful-work consensus based on sequential proofs-of-replication and storage as a measure of power.
(e) Formalizes verifiable markets and constructs two markets, a Storage Market and a Retrieval Market, which govern how data is written to and read from Filecoin, respectively.
(f) Discusses use cases, connections to other systems, and how to use the protocol.

On-going Work
The following topics represent ongoing work.
• A specification of the Filecoin state tree in every block.
• Detailed performance estimates and benchmarks for Filecoin and its components.
• A full implementable Filecoin protocol specification.
• A sponsored-retrieval ticketing model where any client C1 can sponsor the download of another client
C2 by issuing per-piece bearer-spendable tokens.
• A Hierarchical Consensus protocol where Filecoin subnets can partition and continue processing transactions during temporary or permanent partitions.
• Incremental blockchain snapshotting using SNARK/STARK
• Filecoin-in-Ethereum interface contracts and protocols.
• Blockchain archives and inter-blockchain stamping with Braid.
• Only post Proofs-of-Spacetime on the blockchain for conflict resolution.
• Formally prove the realizations of the Filecoin DSN and the novel Proofs-of-Storage.

Open Questions
There are a number of open questions whose answers have the potential to substantially improve the networkvas a whole, despite the fact that none of them have to be solved before launch.
• A better primitive for the Proof-of-Replication Seal function, which ideally is O(n) on decode (not O(nm)) and publicly-verifiable without requiring SNARK/STARK.
• A better primitive for the Proof-of-Replication Prove function, which is publicly-verifiable and transparent without SNARK/STARK.
• A transparent, publicly-verifiable Proof-of-Retrievability or other Proof-of-Storage.
• New strategies for retrieval in the Retrieval Market (e.g. based on probabilistic payments, zero knowledge contingent payments)
• A better secret leader election for the Expected Consensus, which gives exactly one elected leader per epoch.
• A better trusted setup scheme for SNARKs that allows incremental expansion of public parameters (schemes where a sequence of MPCs can be run, where each additional MPC strictly lowers probability of faults and where the output of each MPC is usable for a system).

Proofs and Formal Verification
Because of the clear value of proofs and formal verification, we plan to prove many properties of the Filecoin network and develop formally verified protocol specifications in the coming months and years. A few proofs are in progress and more in mind. But it will be hard, long-term work to prove many properties of Filecoin (such as scaling, offline).
• Proofs of correctness for Expected Consensus and variants.
• Proof of correctness for Power Fault Tolerance asynchronous 1/2 impossibility result side-step.
• Formulate the Filecoin DSN in the universal composability framework, describing Get, Put and Manage as ideal functionalities and prove our realizations.
• Formal model and proofs for automatic self-healing guarantees.
• Formally verify protocol descriptions (e.g. TLA+ or Verdi).
• Formally verify implementations (e.g. Verdi).
• Game theoretical analysis of Filecoin’s incentives.

The completed fundraising puts September on the path of being one of the busiest months for ICOs, according to data from CoinDesk’s ICO Tracker. To date, July 2017 saw the most sales volume, recording more than $500 million.

The second quarter of this year as a whole saw a record-breaking level of activity, with approximately $797 million raised through the funding model during that period.

Initial Coin Offering

An unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin.

ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. […] Investors hope that successful projects will cause tokens’ value to rise.

By the end of August 2017, 89 ICO coin sales worth $1.1 billion had been conducted during the year, ten times as much as in all of 2016

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