2024 is a pivotal year for Filecoin, with significant progress in the Filecoin Virtual Machine (FVM), storage, retrieval, and compute. In this blog post, we’ll review key milestones from 2024 and look at the main growth drivers that will shape Filecoin’s path into 2025.
Source: Filecoin Success Chart, 2024
2024 Retrospective
In our previous blog post (Filecoin 2024 Success Chart), we listed three key priorities for the ecosystem in 2024:
1. Accelerate paid transactions: Improve paid services (storage, retrieval, computing) on Filecoin to create cash flow for service providers. This helps support more sustainable hardware funding beyond token incentives.
2. Growing on-chain activity: Increasing activity through programmable services, DeFi, and new use cases.
3. Become indispensable: Establish Filecoin as an indispensable component of other projects and businesses.
These priorities are not mutually exclusive — they build on each other and are signs that the Filecoin ecosystem is becoming increasingly valuable.
So, where are we in 2024 on these priorities?
1. Accelerate payment transactions
Paid Transactions is an ecosystem-level metric that reflects the volume of paid services within the Filecoin network. FilecoinTLDR is currently tracking this metric here.
In 2024, Filecoin made significant progress in accelerating paid transactions by reducing friction for enterprises to enter the ecosystem, with key advances such as the development of Proof of Data Possession (PDP) and the emergence of Layer 2 solutions.
Using PDP for efficient thermal storage
• Expected in Q1 2025, Proof of Data Possession (PDP) introduces a new proof primitive to the Filecoin network, marking the first major proof evolution since Proof of Replication (PoRep) and Proof of Spacetime (PoSt). Unlike PoRep, which excels at cold storage via sealed sectors, PDP is designed for “hot data”, i.e. data that needs to be retrieved quickly and frequently.
• This new proof type enables cost-effective “cached” storage on Filecoin, without the need for sealing and unsealing, enabling fast data onboarding and retrieval. PDP opens the door to a new class of storage providers focused on hot storage and fast retrieval, benefiting entry-level providers like Basin, Akave, and Storacha.
Scaling Filecoin with L2
• In 2024, we see an increase in Layer2 solutions built on top of Filecoin. L2s like Basin, Akave, and Storacha enable horizontal and vertical scaling through secure, customizable subnets. These L2s enhance Filecoin by unlocking new use cases: including managing data-intensive workloads, supporting AI and unstructured data, and powering gaming and privacy-focused applications — all of which create more opportunities for paid transactions.
2. Growing on-chain activity
Filecoin has made significant progress in accelerating on-chain activity through FVM, which has spurred the growth of its DeFi economy. The proposed launch of Filecoin Web Services (FWS) and FIL-collateralized stablecoins will further boost this momentum.
Source: Deflama (as of December 16, 2024)
DeFi Milestones
• As of Dec 16, 2024, over 4,700 unique contracts have been deployed on FVM, enabling over 3M transactions. DeFi activity on FVM averaged over 30M FIL ($200M) in net deposits, driven by staking, liquidity staking, and DEX, with GLIF leading with 62%, followed by FilFi (10%) and SFT Protocol (9%). Net borrowing averaged 26M FIL ($173M), highlighting the strong growth of the Filecoin DeFi ecosystem.
FIL is the collateral stablecoin provided by the Filecoin ecosystem
• USDFC is a FIL-backed stablecoin launched by Secured Finance in Q4 2024 that aims to address key challenges in the Filecoin ecosystem. It introduces stability, reduces volatility, and enhances store of value to a network that previously lacked stablecoin options, just as DAI did for Ethereum.
• By allowing FIL holders and SPs to pledge their assets for USD, USDFC helps to pay operating costs without selling FIL, thereby maintaining asset value and network support. It also improves liquidity in the lending market by providing FIL-backed stablecoin liquidity, thereby driving more efficient capital flows within the Filecoin ecosystem.
3. Becoming indispensable
DePIN gained prominence and Filecoin strengthened its position through key partnerships with AI and computing projects. Meanwhile, on-chain archiving gained significant recognition through major on-ramp partnerships.
“…thanks to Filecoin for building an awesome decentralized archive layer.” – Anatoly (Co-founder, Solana)
Notable Entrances in 2024
• At this year’s Solana Breakpoint, Filecoin founder Juan Benet highlighted how Filecoin’s zero-knowledge (ZK) storage protects the entire Solana ledger.
• Similarly, Cardano applications now have the opportunity to promote data redundancy and decentralization through Blockfrost’s integration with Filecoin.
• SingularityNET’s integration with Filecoin (via Lighthouse) highlights the growing need for scalable and cost-effective storage in the AI-driven era, where efficiently managing vast amounts of data is critical.
• These meaningful partnerships help demonstrate that Filecoin plays a critical role in both the Chain Archival and AI narratives.
Source: Filecoin (X)
Computing and AI Partnership
• This year, Filecoin has positioned itself as a key player in the growing decentralized AI space. Projects in the ecosystem such as Ramo (network participation), Bagel (AI and cryptography research), Swan Chain (AI training and development), and Lilypad (AI distributed computing) have highlighted Filecoin’s expanding role in driving AI innovation.
2024 Filecoin Challenge
Despite the huge progress, we noticed some challenges that the community was facing. Although keep in mind that Web3 products are still in a very early state and the problem statement of forming a reliable alternative to the centralized cloud is a huge one.
Product-Market Fit:
• Obstacles such as limited retrievability and high costs (driven by data replication) challenge the efficiency of the Filecoin network.
• Payments need to be simplified by allowing transactions to be conducted directly on the Filecoin network, using methods such as stablecoins, or flexible payment options.
• Increasing visibility into the lead process and using customer data can help refine strategy and improve performance in key areas.
Building a sustainable economic model + a stronger economic cycle:
Thinking of Filecoin as an island economy highlights its focus on accumulating value by exporting goods and services while keeping as much value as possible within the network by minimizing outflows.
Source: Realizing the Vision of Filecoin (Part 2) – Juan Benet
• A key challenge is to reduce external capital outflows while finding ways to boost exports and capture more demand within the ecosystem.
• Ensuring transactions remain on-chain is equally important to strengthening this economic model and creating a stronger economic cycle.
Filecoin Outlook 2025
As we look ahead to 2025, Filecoin will continue to evolve. Here are three key themes that can drive transformative growth for the network while addressing the 2024 challenges mentioned above.
“Filecoin is at an inflection point”
1. Speeding up Filecoin 450x with Fast Finality (F3)
Fast Finality (F3) is one of the most impactful upgrades to the consensus layer since the launch of Filecoin’s mainnet. By significantly reducing the time to transaction finality, F3 overcomes a key limitation of the network’s original consensus mechanism. This enhancement is scheduled to be launched on the mainnet in the first quarter of 2025.
Old ending and new ending:
• Before F3, Filecoin’s consensus mechanism ensured secure block verification, but it took 7.5 hours (900 epochs) to complete a transaction, which was too slow for applications such as smart contracts or cross-chain bridges.
• With F3, transactions can now optimistically complete in minutes, a 450x increase in speed.
What this means for Filecoin:
• Enhanced speed and user experience: Transactions complete in minutes, enabling low-latency applications and eliminating the long waits previously experienced.
• Expanded use cases and accessibility: Blockchain bridges like InterPlanetary Consensus (IPC, efficient smart contracts and decentralized applications, interoperable with other chains.
Ultimately, this enables Filecoin to increase its usability across a wider range of applications.
2. Go beyond storage with FWS
Filecoin Web Services (FWS) has emerged as a key concept this year. It represents a strategic shift for Filecoin, expanding its scope from a primarily decentralized storage network to a broader blockchain-based cloud services market. This diversification could attract a wider range of users and use cases, potentially creating a more positive economic cycle within the network. Here are some tips on why FWS should grab your attention:
• Strengthening Filecoin’s competitive advantage: FWS will introduce features such as programmatic SLAs (automating and enforcing service agreements through smart contracts, ensuring clear performance expectations and penalties) and verifiable proofs (providing cryptographic evidence of service delivery, allowing customers to independently verify service execution).
• Expanding Filecoin’s functionality: Enable powerful hot storage use cases by adding Proof of Data Ownership (PDP) beyond Proof of Replication (PoRep). PDP will help improve data retrievability, a key factor in achieving product-market fit that has been widely discussed within the Filecoin community this year.
• Positioning Filecoin as the leading platform for the decentralized web: FWS will facilitate the integration of multiple networks and protocols, creating a cohesive marketplace for storage, compute, bandwidth, and other services. This could make Filecoin a key player in the development of the decentralized web.
FWS is currently a concept under development and a new storage service featuring PDP (v0) is being developed. After this milestone, the development of the FWS market will begin with a launch expected in Q1 2025.
3. Unlocking new value streams in Filecoin
As a layer 1 blockchain, Filecoin generates revenue primarily through burning gas fees (which occurs when chain resources are used or when failures occur). However, relying on gas fee burn as the main source of revenue is not scalable, and more importantly, it will increase operating expenses and service costs.
A sustainable approach involves returning value to the Filecoin economy by using services in the FWS market, thereby fostering a more scalable and balanced revenue model. Proposed value accrual mechanisms include:
• FWS Fees: Commission (%) is charged based on the trading volume on the market.
• Service fees: Applied when a user accesses a service or when a provider provides a service
• SLA penalties: imposed on service providers who fail to meet agreed performance standards
This shift is expected to provide more robust and diversified revenue streams, ensuring Filecoin remains relevant and profitable in an evolving market.
Final Thoughts
As the value of data grows, we expect the role of privacy-preserving machine learning, data-driven business models, and AI agents to grow in unlocking the potential of decentralized storage.
Looking ahead to 2025, with the upcoming launch of Fast Finality (F3) on mainnet and the continued development of Filecoin Web Services, Filecoin will play a central role in shaping the future of data and AI in the decentralized ecosystem. We look forward to seeing these advances position Filecoin beyond storage and unlock sustainable economic models through new revenue streams generated by FWS.