2024 is a pivotal year for Filecoin: Launching the USDFC collateralized stablecoin; Looking ahead to 2025: Accelerating the network 450 times through Fast Finality (F3)
2024 is a pivotal year for Filecoin
: Launching the USDFC collateralized stablecoin; Looking ahead to 2025: Accelerating the Filecoin network 450 times through Fast Finality (F3)
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2024 is a pivotal year for Filecoin, with significant progress made in Filecoin Virtual Machine (FVM), storage, retrieval, and computing. In this blog post, we will review key milestones of 2024 and look at the main growth drivers shaping Filecoin's path into 2025.
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Source: Filecoin's Success Chart, 2024
2024 Review
In our previous blog post (Success Chart of Filecoin 2024), 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 essential component for other projects and businesses.
These priorities are not mutually exclusive—they overlap and all signify the increasing value of the Filecoin ecosystem.
So, how do 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. FilecoinTLDR is currently tracking this metric here.
In 2024, Filecoin has made significant progress in accelerating paid transactions by reducing the friction for enterprises entering the ecosystem, achieving key advancements such as the development of Proof of Data Ownership (PDP) and the emergence of Layer 2 solutions.
Using PDP to Achieve Efficient Hot Storage
• It is expected that in Q1 2025, Proof of Data Ownership (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 at cold storage through sealed sectors, PDP is designed for 'hot data' that requires rapid and frequent retrieval.
• This new proof type enables economically efficient 'cache' storage on Filecoin without the need for encapsulation and decapsulation, allowing for rapid data onboarding and retrieval. PDP opens the door for a new category of storage providers focused on hot storage and quick retrieval, benefiting entry-level providers like Basin, Akave, and Storacha.
Using L2 to Expand Filecoin
• In 2024, we saw an increase in Layer 2 solutions built on Filecoin. L2s like Basin, Akave, and Storacha achieve horizontal and vertical scalability through secure, customizable subnets. These L2s enhance Filecoin by unlocking new use cases: managing data-intensive workloads, supporting AI and unstructured data, and providing support for gaming and privacy-focused applications—all creating more opportunities for paid transactions.
2. Growing On-chain Activity
Filecoin has made significant progress in accelerating on-chain activity through FVM, stimulating growth in its DeFi economy. The proposed launch of Filecoin Web Services (FWS) and FIL-backed 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 deposit of DeFi activity on FVM exceeds 30M FIL ($200M), with GLIF leading at 62%, followed by FilFi (10%) and SFT Protocol (9%). The average net borrowing is 26M FIL ($173M), highlighting the strong growth of the Filecoin DeFi ecosystem.
FIL-backed stablecoin provided for the Filecoin ecosystem
• USDFC is a FIL-backed stablecoin launched by Secured Finance in Q4 2024, aimed at addressing critical challenges within the Filecoin ecosystem. It introduces stability to a network previously lacking 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 USD, USDFC helps cover operational costs without selling FIL, thereby maintaining asset value and network support. It also enhances liquidity in the lending market by providing FIL-backed stablecoin liquidity, driving more efficient capital flow within the Filecoin ecosystem.
3. Becoming Indispensable
DePIN has gained prominence, as Filecoin strengthens its position through key partnerships with AI and computing projects. Meanwhile, on-chain archiving has gained significant recognition through major entry partnerships.
'... thanks to Filecoin for building a great decentralized archiving layer.' – Anatoly (Co-founder of Solana)
Notable Entries 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 integration with Filecoin via Blockfrost.
• The integration of SingularityNET with Filecoin (through Lighthouse) emphasizes the growing demand for scalable and economically efficient storage in an AI-driven era, where effectively managing vast amounts of data is crucial.
• These meaningful partnerships help demonstrate Filecoin's critical 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 rapidly growing decentralized AI space. Projects within the ecosystem, such as Ramo (network participation), Bagel (AI and cryptography research), Swan Chain (AI training and development), and Lilypad, as well as the launch of 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. Keep in mind that Web3 products are still in a very early stage, and the statement of the problem of forming a reliable alternative to centralized cloud solutions is a huge 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 or flexible payment options.
• Improving visibility into bootstrapping processes and utilizing customer data helps refine strategies and enhance performance in key areas.
Building a sustainable economic model + stronger economic cycles:
Viewing Filecoin as an island economy highlights its focus on accumulating value through exports of goods and services while retaining as much value as possible within the network by minimizing outflows.
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Source: Realizing Filecoin's Vision (Part 2) – Juan Benet
• A key challenge is to reduce external capital outflows while finding ways to promote exports and attract more demand within the ecosystem.
• Ensuring that transactions remain on-chain is equally important for strengthening this economic model and creating a more robust economic cycle.
Filecoin 2025 Outlook
Looking ahead to 2025, Filecoin will continue to evolve. Here are three key themes that could drive transformative growth for the network while addressing the challenges posed in 2024.
'Filecoin is at a turning point'
1. Accelerate Filecoin 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 scheduled to go live on the mainnet in Q1 2025.
Old endings and new beginnings:
• Before F3, Filecoin's consensus mechanism ensured secure block validation, but transactions took 7.5 hours (900 epochs) to complete, 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 speed increase.
What this means for Filecoin:
• Enhanced speed and user experience: Transactions are completed in minutes, enabling low-latency applications and eliminating the long wait times previously experienced.
• Expanded use cases and accessibility: Interstellar Consensus (IPC), efficient smart contracts, and decentralized applications with cross-chain interoperable blockchain bridges.
Ultimately, this allows Filecoin to enhance its usability across a broader range of applications.
2. Going Beyond Storage with FWS
Filecoin Web Services (FWS) became a key concept this year. It represents a strategic shift for Filecoin, expanding its scope from being primarily a 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 catch your attention:
• Strengthening Filecoin's competitive advantage: FWS will introduce programmable SLAs (automating and enforcing service agreements through smart contracts to ensure clear performance expectations and penalties) and verifiable proofs (providing cryptographic evidence of service delivery, allowing clients to independently verify service execution) among other features.
• Expanding Filecoin's capabilities: Adding Proof of Data Ownership (PDP) beyond Proof of Replication (PoRep) to enable robust hot storage use cases. PDP will help enhance data retrievability, a crucial factor for achieving product-market fit, which has garnered widespread discussion within the Filecoin community this year.
• Positioning Filecoin as a leading platform for decentralized networks: FWS will facilitate integration across 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, working on a new storage service featuring PDP (v0). Following this milestone, the development of the FWS market will begin with an expected launch in Q1 2025.
3. Unlocking New Value Streams in Filecoin
As a Layer 1 blockchain, Filecoin generates revenue primarily through gas fee burns (which occur when chain resources are used or when failures happen). However, relying on gas fee burn as the main revenue source is not scalable and, more importantly, increases operational expenses and service costs.
Sustainable approaches include returning value to the Filecoin economy through services in the FWS market, fostering more scalable and balanced revenue models. Proposed value accrual mechanisms include:
• FWS Fees: Commissions (%) charged based on transaction volume in the market.
• Service Fees: Applied when users access services or services provided by vendors
• SLA Penalties: Imposed on service providers for failing to meet agreed performance standards
This transformation is expected to provide more robust and diversified revenue streams, ensuring Filecoin remains relevant and profitable in a rapidly evolving market.
Final Thoughts
As the value of data grows, we anticipate that privacy-preserving machine learning, data-driven business models, and AI agents will play an increasingly vital role in unlocking the potential of decentralized storage.
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 in 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.
