2024 is a critical year for Filecoin: Launching the USDFC collateralized stablecoin; Looking ahead to 2025: Accelerating the network by 450 times through fast finality (F3)
2024 is a pivotal year for Filecoin
Launch of the USDFC collateralized stablecoin; Looking ahead to 2025: Accelerating the Filecoin network by 450 times through fast finality (F3)
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2024 is a pivotal year for Filecoin, achieving significant advancements in Filecoin Virtual Machine (FVM), storage, retrieval, and computing. In this blog post, we will review key milestones from 2024 and look at the main growth drivers shaping Filecoin's path into 2025.
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Source: Filecoin Success Chart, 2024
2024 Review
In our previous blog post (Filecoin 2024 Success Chart), we outlined three key priorities for the ecosystem in 2024:
1. Accelerating paid transactions: Enhancing paid services (storage, retrieval, computing) on Filecoin, creating 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. Becoming indispensable: Establishing Filecoin as an indispensable component for other projects and businesses.
These priorities are not mutually exclusive—they overlap and are all signs of an increasingly valuable Filecoin ecosystem.
So, how did we perform on these priorities in 2024?
1. Accelerating paid transactions
Paid transactions are an ecosystem-level metric that reflects the volume of paid services within the Filecoin network. Filecoin TLDR is currently tracking this metric here.
In 2024, Filecoin made significant progress in accelerating paid transactions by reducing barriers for enterprises entering the ecosystem, achieving key advancements such as the development of data holding proofs (PDP) and the emergence of Layer 2 solutions.
Implementing efficient hot storage using PDP
• In Q1 2025, data holding proofs (PDP) will introduce a new proof primitive to the Filecoin network, marking the first significant proof development since proof of replication (PoRep) and proof of space-time (PoSt). Unlike PoRep, which excels in cold storage through sealed sectors, PDP is designed for 'hot data,' which requires rapid and frequent retrieval.
• This new type of proof enables economically efficient 'cache' storage on Filecoin, allowing for fast data onboarding and retrieval without packaging and unpacking. PDP opens the door for a new class of storage providers focused on hot storage and rapid retrieval, benefiting entry-level providers such as Basin, Akave, and Storacha.
Using L2 to scale Filecoin
• In 2024, we saw an increase in Layer 2 solutions built on Filecoin. L2s like Basin, Akave, and Storacha achieve 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 providing support for 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, stimulating the growth of its DeFi economy. The proposed launch of Filecoin Web Services (FWS) and the FIL collateralized stablecoin will further drive this momentum.
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Source: Defillama (as of December 16, 2024)
DeFi Milestone
• As of December 16, 2024, over 4,700 unique contracts have been deployed on FVM, achieving over 3 million transactions. Driven by staking, liquid staking, and DEX, the average net deposits for DeFi activities on FVM exceed 30M FIL ($200M), with GLIF leading at 62%, followed by FilFi (10%) and SFT protocol (9%). Average net borrowing stands at 26M FIL ($173M), highlighting the strong growth of the Filecoin DeFi ecosystem.
FIL-backed stablecoins provided for the Filecoin ecosystem
• USDFC is a FIL-backed stablecoin launched by Secured Finance in Q4 2024, aimed at addressing key challenges in the Filecoin ecosystem. It introduces stability to a network that previously lacked stablecoin options, reducing volatility and enhancing value storage, similar to what DAI has done for Ethereum.
• By allowing FIL holders and SPs to collateralize their assets as US dollars, USDFC helps cover operating costs without selling FIL, thus maintaining asset value and network support. It also enhances liquidity in the lending market by providing FIL-backed stablecoin liquidity, promoting more efficient capital flows within the Filecoin ecosystem.
3. Becoming indispensable
DePIN has gained prominence as Filecoin enhances its position through key partnerships with AI and computing projects. Meanwhile, on-chain archiving has received significant recognition through major entry partnerships.
“… thanks to Filecoin for building an amazing decentralized archival layer.” – Anatoly (Co-founder of Solana)
Notable Entry for 2024
• At this year's Solana Breakpoint, Filecoin founder Juan Benet emphasized 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 integration with Filecoin via Blockfrost.
• The integration of SingularityNET with Filecoin (through Lighthouse) underscores the growing demand for scalable and economically efficient storage in the age of AI-driven solutions, where effectively managing vast amounts of data is crucial.
• These meaningful partnerships help indicate Filecoin's key role in both Chain Archival and AI narratives.
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Source: Filecoin (X)
Computing and AI partnerships
• This year, Filecoin positions itself as a key player in the growing decentralized AI space. Projects in the ecosystem like Ramo (network participation), Bagel (AI and cryptographic research), Swan Chain (AI training and development), and Lilypad, as well as Lilypad (AI distributed computing), highlight Filecoin's expanding role in driving AI innovation.
2024 Filecoin Challenge
Despite significant progress, we note some challenges faced by the community. It is important to remember that Web3 products are still in very early stages, and the problem statement of forming a reliable alternative to centralized cloud is a massive issue.
Product-market fit:
• Barriers such as limited retrievability and high costs (driven by data replication) pose challenges to the efficiency of the Filecoin network.
• There is a need to simplify payments by allowing transactions directly on the Filecoin network, using stablecoins and other flexible payment options.
• Improving visibility into onboarding processes and utilizing customer data helps refine strategies and enhance performance in key areas.
Building sustainable economic models + stronger economic loops:
Viewing Filecoin as an island economy highlights its focus on accumulating value through exporting goods and services while maximizing value retention within the network by minimizing outflows.
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Source: Realizing the Vision for Filecoin (Part 2) – Juan Benet
• A key challenge is to reduce outflow of external funds while finding ways to promote exports and capture more demand within the ecosystem.
• Ensuring transactions remain on-chain is equally important for strengthening this economic model and creating a stronger economic loop.
Filecoin 2025 Outlook
Looking ahead to 2025, Filecoin will continue to evolve. Here are three key themes that can drive transformative growth for the network while addressing the above challenges of 2024.
"Filecoin is at a turning point"
1. Accelerating Filecoin by 450 times through fast finality (F3)
Fast Finality (F3) is one of the most impactful upgrades to the consensus layer since Filecoin's mainnet launch. By significantly shortening transaction finality times, F3 overcomes a key limitation of the network's original consensus mechanism. This enhancement is slated for mainnet launch in Q1 2025.
Old endings vs new endings:
• Before F3, Filecoin's consensus mechanism ensured secure block validation, but it took 7.5 hours (900 epochs) to complete transactions, which is too slow for applications like smart contracts or cross-chain bridges.
• With F3, transactions can now optimistically complete in minutes, achieving a 450-fold increase in speed.
What does this mean for Filecoin:
• Enhanced speed and user experience: Transactions are completed within minutes, enabling low-latency applications and eliminating the long wait times previously experienced.
• Expanded use cases and accessibility: such as Interstellar Consensus (IPC), efficient smart contracts, decentralized applications, and blockchain bridges that interoperate with other chains.
Ultimately, this enables Filecoin to enhance its usability across a broader range of applications.
2. Going beyond storage with FWS
Filecoin Web Services (FWS) has become a key concept this year. It represents a strategic shift for Filecoin, expanding its scope from primarily a decentralized storage network to a broader blockchain-based cloud services market. This diversification can attract a wider range of users and use cases, potentially creating a more positive economic loop within the network. Here are some reasons why FWS should catch your attention:
• Strengthening Filecoin’s competitive edge: FWS will introduce programmable 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).
• Extending Filecoin's capabilities: By adding data ownership proofs (PDP), going beyond proof of replication (PoRep), enabling powerful hot storage use cases. PDP will help improve data retrievability, which is a key factor in achieving product-market fit, widely discussed within the Filecoin community this year.
• Positioning Filecoin as a leading platform for decentralized networks: FWS will facilitate the integration of multiple networks and protocols, creating a cohesive market for storage, computing, bandwidth, and other services. This could make Filecoin a key player in the development of decentralized networks.
FWS is currently a developing concept that is working on a new storage service featuring PDP (v0). Following 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 primarily generates revenue by burning gas fees (which occur when using chain resources or in case of failure). However, relying on gas fee burn as the main source of income is unsustainable and, more importantly, increases operational costs and service fees.
Sustainable approaches include returning value to the Filecoin economy by using services in the FWS market, fostering a more scalable and balanced revenue model. The proposed value accrual mechanism includes:
• FWS Fees: Commission (%) charged based on transaction volume in the market.
• Service Fees: Applied when users access services or when providers offer services
• SLA Penalties: Imposed on service providers who fail to meet agreed performance standards.
This shift is expected to provide stronger and more diverse sources of revenue, ensuring that Filecoin remains relevant and profitable in a rapidly 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 in unlocking the potential of decentralized storage to continually increase.
Looking ahead to 2025, as fast finality (F3) is about to launch on the mainnet and with the ongoing development of Filecoin Web Services, Filecoin will play a central role in shaping the future of data and AI within decentralized ecosystems. We look forward to seeing how these advancements position Filecoin beyond storage and unlock sustainable economic models through new revenue streams generated by FWS.
