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Filecoin Staking: How To Get Started

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September 8, 2022October 24, 2022
Filecoin Staking: How To Get Started

Table of Contents

What is Filecoin?

Filecoin represents a novel blockchain solution to the issues of global storage and data retrieval. Storage of information occurs on-chain and in a decentralized fashion using the InterPlanetary File System protocol. This also allows users to rent out hard drive space using FIL, the project’s native token.

The project’s developers liken using Filecoin to the process of renting out your apartment or house. However, in this case, the transactions involve the distribution of vital digital storage through a free and decentralized ecosystem. Is this a matter of such grave concern? With practically every business being made available on the current iteration internet and soon on Web 3.0, digital real estate is an entirely legitimate concern.

The Filecoin project began in 2014. It is the brainchild of Juan Benet, and Protocol Labs, the company he owns, developed it. Its official launch occurred in 2017. Its ICO raised over $257 million. The project’s main selling point revolves around the concept of better managing the ample storage that exists in the world and which is not used effectively. Filecoin rewards storage providers with FIL, its native token, and offers those searching for digital storage greater online space on which to develop their projects.

Main features of Filecoin

Filecoin’s concept involves creating a functioning ecosystem that encourages more efficient use of data storage. It functions as a marketplace on which providers and users of storage space can meet.

In order to achieve its goals, the crypto-project has also introduced a number of exciting features. While there are several similar-minded competitors on the market, these features help set Filecoin apart. Some of these include:

  • Verifiable Storage through which Filecoin can check if the information has been stored correctly. Essentially, the protocol receives a report every 24 hours from the storage providers. This will confirm whether data is stored correctly and whether clients are able to verify these reports. Just as importantly, future customers can check the reputation of a storage provider, thereby improving security and efficiency.
  • Embraces an open market through which supply and demand determine the prices for the decentralized storage services. Ultimately, this means that a user’s contribution is the sole contributor to their success in the ecosystem.
  • The open-source code policy adheres to the crypto world’s original vision of decentralization. Furthermore, this allows any user to bring improvements to Filecoin’s code.

Other noteworthy features of Filecoin

  • There are no lock-in difficulties because each data provider offers the exact same services and API, and it is easy to migrate from one to another. It’s well known how many cloud storage providers make it difficult and expensive to move data. This is not the case with Filecoin.
  • Storage to other blockchains will be available shortly, and, unlike other chain applications, Filecoin is able to store large amounts of data.
  • Content addressing and distribution networks make it so that information storage doesn’t require a central point (becoming at risk of technical malfunctions), and providers are rewarded for maintaining the network running smoothly and efficiently for everyone in the ecosystem.
  • Applications are able to store information using one protocol regardless of the storage provider.
  • Reliability and a strong reputation, in particular, account for the service’s popularity in the crypto space and provide encouragement for the future of the project.

Using the Proof of Replication model

Miners play an essential role in the functioning of the Filecoin ecosystem. The storage of these vital connections, as well as all network information, occurs on the Ethereum blockchain. A network participant helps mine blocks at specific intervals, thus helping update the network.

Filecoin uses a model that is based on both Proof-of-Work (PoW) and Proof-of-Stake (PoS) system characteristics. Filecoin calls it Proof of Replication (PoRep). The user that helps mine a new block is rewarded with FIL currency. The miner’s choice is based on the amount of storage they are providing and, in essence, how much they can contribute to the network. What is the purpose of using a unique mining model? The project’s developers opt to create their own Filecoin mining algorithm in order to ensure a safe, fair, and unobstructed process.

There are three different types of miners on Filecoin. Storage Miners ensure that information gets stored on the network. They provide confirmation that client information is stored at fixed intervals. Retrieval miners help retrieve information on the network and additionally can start earning FIL for bidding for particular files. Also, repair miners are due to appear on the network in the future.

Differences between Filecoin mining and staking

Mining assists in maintaining the Filecoin ecosystem in working condition. Instead of the Bitcoin model, where users consume computational power, the Filecoin model redistributes data space. The FIL token, the incentive, uses the IFPS storage protocol. In brief, Filecoin mining machines transform the ability to store data into veritable mining power. Also, miners contribute to the network through gas fees and by storing FIL tokens.

While users mine by lending storage capacity, the staking mechanism involves users holding FIL cryptocurrency in their personal wallets for a set period of time. This helps develop the FIL token and is rewarded accordingly.

Filecoin does not feature a traditional staking method. Instead, users are encouraged to use third-party, DeFI services. Some of these offer a solid APY, making this a genuine investment opportunity for many crypto users. Some of the existing staking options include Gemini, Coinlist, Binance, or CrossFi.

How to stake Filecoin

Staking FIL allows users of Filecoin to earn passive income as a result of locking their crypto assets for a set period of time. Various platforms allow their users to stake FIL. It is advisable as a result to check on the rewards of each of these in order to verify which option is preferable.

The well-known crypto platforms Binance and Gemini are among those that currently offer this service. Staking on both of these is a similar process. The steps required to stake FIL are as follows:

  • Create an account and verify KYC information
  • Fund your new account and purchase FIL tokens. Alternatively, you can deposit FIL into your exchange wallet.
  • Visit the Staking section. On Binance, this should appear under the Earn tab
  • Find FIL (under Locked Staking on Binance) and confirm by clicking Stake
  • Enter the amount that you wish to stake and confirm the transaction
  • Verify the information on your dashboard. This should show your APY, coupled with the conditions for withdrawing your funds.

Top 4 methods for Filecoin staking

As previously mentioned, Filecoin does not feature a direct, traditional staking system. This means that network participation is not based on providing collateral and that instead, FIL staking involves using third-party crypto applications. Let’s take a quick look at the most important ones.

Binance

Users of the popular crypto exchange service Binance are able to earn rewards when they stake FIL on the platform. Generally, the APR (annual percentage rate) for staking FIL is 0.4%. In conclusion, the offer is redeemable at any time, although previously, it was available only as part of a locked staking system.

Gemini

In addition, many crypto users reported preferring Gemini Filecoin staking. Besides, the current reward for this is 7.25%. There are no extra fees, and at any time, the rewards can be redeemed.

Filet

Crypto users can stake FIL on Filet for a 23% APY for a 180-day turn. The staking period is flexible.

CrossFi

CrossFi promises at least around 20% Filecoin staking APY, with cFIL token offered during the staking period. In fact, the platform encourages long-term staking.

Additionally, a number of crypto exchanges (Crypto.com, OKX, or Huobi) had included FIL in their Earn programs until recently. While the offer is not currently available, it may be worth keeping an eye on these platforms for future updates.

Pros and cons of Filecoin staking

There are several positive and negative elements worth considering before staking FIL.

Some of the pros include:

  • Staking FIL helps support the Filecoin ecosystem and the goal of improving the use of global data storage
  • Staking provides FIL owners with passive income
  • There’s significant optimism over the future valuation of FIL

Some of the notable cons include:

  • Miners commit resources to the Filecoin economy in order to participate within the ecosystem
  • There aren’t many third-party staking options at the time of writing

What’s Filecoin’s role in the crypto ecosystem

To begin with, the Filecoin project has always been built around a sound idea. Its developers wish to utilize the potential of blockchain technology in the service of global digital storage and data retrieval. This, together with its focus on a decentralized, open-source model, has found plenty of fans, as proven by its success during its ICO phase.

This peer-to-peer digital storage marketplace has some way to travel before it can reach its full potential in terms of market backing. However, besides its integral features, its users may use FIL, its native token, for staking on various platforms such as Binance or Gemini. And, with more supporters embracing the Filecoin project, it will no doubt find the success that some crypto analysts have predicted for it.

Filecoin FAQ

Is Filecoin mining profitable?

Mining Filecoin can be particularly profitable. Mining involves lending data storage capacity through the Proof of Replication system. Notwithstanding the profit, miners help maintain the Filecoin ecosystem.

Does Filecoin have a future?

Filecoin has been in development since 2014 and continues to grow in size as a project. It is likely that Filecoin has a future within the crypto space.

How much do you make with Filecoin?

Filecoin’s FIL can be staked on various platforms for APRs as large as 20%. Furthermore, users can mine on Filecoin through a system that involves lending their data storage.

Can I stake Filecoin?

Staking Filecoin’s token, FIL, can be done on third-party platforms such as Gemini and Binance.

How does Filecoin staking work?

Filecoin’s token, FIL, is available for staking on reputable platforms such as Binance and Gemini.

Is Filecoin an erc20 token?

Filecoin functions on the Ethereum blockchain. For this purpose, FIL is an erc20 token. 

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