Original Author: Filecoin Network
2024 is a pivotal year for Filecoin, with significant advancements in the Filecoin Virtual Machine (FVM), storage, retrieval, and computation. In this article, we will review the key milestones of 2024 and explore the main growth drivers for Filecoin's development in 2025.
Source: The Path to Success for Filecoin in 2024 (https://filecointldr.io/article/charting-success-for-filecoin-2024)
2024 Review
In our earlier article, “The Path to Success for Filecoin in 2024”, we outlined three key priorities for the ecosystem in 2024:
Accelerating Paid Transactions: Promoting paid services (storage, retrieval, computation) on Filecoin, creating cash flow for service providers, and supporting more sustainable hardware financing beyond token incentives.
Promoting On-Chain Activity Growth: Increasing on-chain activity through programmable services, DeFi, and new use cases.
Becoming Indispensable: Making Filecoin an essential component for other projects and businesses.
These priorities are not mutually exclusive; they build on each other, indicating that the Filecoin ecosystem is becoming increasingly valuable. So, how did we perform on these priorities in 2024?
1. Accelerating Paid Transactions
Paid transactions are an ecosystem-level metric that reflects the number 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 entering the ecosystem, primarily through the development of Proof of Data Ownership (PDP) and the emergence of Layer 2 solutions.
1. Efficient Hot Storage with PDP
The Proof of Data Ownership (PDP) is expected to launch in Q1 2025, introducing a new proof primitive to the Filecoin network, marking the first major proof development since Proof of Replication (PoRep) and Proof of Spacetime (PoSt). Unlike PoRep, which excels at cold storage through encapsulated sectors, PDP is designed for "hot data," which requires fast and frequent retrieval.
This new type of proof enables economically efficient "cache" storage on Filecoin without the need for encapsulation and decapsulation, allowing for rapid data loading and retrieval. PDP opens the door for new storage providers focused on hot storage and quick retrieval, benefiting companies like Basin, Akave, and Storacha.
2. Scaling Filecoin through Layer 2
- In 2024, we saw an increase in Layer 2 solutions built on Filecoin (see our earlier article “State of Layer 2s on Filecoin”). L2s like Basin, Akave, and Storacha can scale horizontally and vertically through secure, customizable subnets. These L2s strengthen Filecoin by releasing new use cases, including managing data-intensive workloads, supporting AI and unstructured data, and enabling gaming and privacy-focused applications, all of which create more opportunities for paid transactions.
2. Promoting On-Chain Activity Growth
Filecoin has made significant progress in accelerating on-chain activity through FVM, stimulating the growth of the DeFi economy. The proposed Filecoin Network Services (FWS) and the launch of Filecoin-backed stablecoins will further drive this momentum.
Source: Defillama (as of December 16, 2024) (https://defillama.com/chain/Filecoin?pool2=false&govtokens=false&doublecounted=false&liquidstaking=true&staking=true¤cy=FIL)
1. DeFi Milestones
- As of December 16, 2024, over 4,700 independent contracts have been deployed on FVM, facilitating over 3 million transactions. The average net deposits on FVM exceed 30 million FIL (approximately $20 million), primarily driven by liquidity staking, yield farming, and DEXs, with GLIF accounting for 62%, followed by FilFi (10%) and SFT Protocol (9%). The average net borrowing stands at 26 million FIL ($173 million), showcasing the strong growth potential of the Filecoin DeFi ecosystem.
- FIL-Backed Stablecoin in the Filecoin Ecosystem
USDFC is a FIL-backed stablecoin launched by Secured Finance in Q4 2024, aimed at addressing key challenges within the Filecoin ecosystem. It brings 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 service providers to collateralize their assets in USD, USDFC can help cover operational costs without selling FIL, thereby preserving 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, and Filecoin has solidified its position by establishing important partnerships with AI and computing projects. Meanwhile, on-chain archiving has gained widespread recognition through partnerships with major on-ramp partners.
Solana co-founder Anatoly stated, “Thanks to Filecoin for creating an excellent decentralized archiving layer.”
1. Notable On-Ramps 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 enhance data redundancy and decentralization through integration with Filecoin via Blockfrost.
SingularityNET integration with Filecoin (via Lighthouse) emphasizes the growing demand for scalable and cost-effective storage in the AI-driven era, where efficient management of massive data is crucial.
These meaningful partnerships help showcase Filecoin as a key player in the fields of on-chain archiving and artificial intelligence.
Source: Filecoin (X) (https://x.com/Filecoin/status/1831629192133218683)
2. Computing and AI Partnerships
- This year, Filecoin positions itself as a key player in the evolving decentralized artificial intelligence space. Projects such as Ramo (network participation), Bagel (AI and cryptography research), Swan Chain (AI training and development), and Lilypad (AI distributed computing) have launched within the ecosystem, highlighting Filecoin's expanding role in driving AI innovation.
2024 Challenges for Filecoin
While significant progress has been made, we also recognize some challenges faced by the community. Although Web3 products are still in their early stages, forming a reliable centralized cloud alternative remains a significant challenge.
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 for transactions to occur directly on the Filecoin network through means such as stablecoins or flexible payment options, making payments more convenient.
Improving the visibility of storage processes and leveraging user data can help refine strategies and enhance performance in key areas.
Establishing a Sustainable Economic Model + Stronger Economic Circulation:
Viewing Filecoin as an island economy emphasizes its focus on accumulating value through the export of goods and services while retaining as much value as possible within the network by minimizing outflows.
Source: Realizing the Vision of Filecoin (Part Two) - Juan Benet (https://www.youtube.com/watch?v=kSE1gZVMXHk&t=479s)
The key challenge lies in reducing external capital outflows while finding ways to promote exports and capture more demand within the ecosystem.
Ensuring that transactions remain on-chain is also crucial for strengthening this economic model and creating a more robust economic cycle.
Outlook for Filecoin in 2025
Looking ahead to 2025, Filecoin's development continues. Here are three key themes that can drive the transformative development of the network while addressing the challenges faced in 2024.
Blockworks Research states: “Filecoin is at a turning point.”
1. Boosting Filecoin's Speed by 450 Times with Fast Finality (F3)
Fast Finality (F3) is one of the most impactful upgrades to its consensus layer since the launch of the Filecoin mainnet. By significantly shortening transaction completion times, F3 overcomes a key limitation of the network's original consensus mechanism. This upgrade is scheduled to launch on the mainnet in Q1 2025.
Old vs. New:
Before F3, Filecoin's consensus mechanism ensured secure block validation but required 7.5 hours (900 epochs) to complete transactions, which was too slow for applications like smart contracts or cross-chain bridging.
With F3, transactions can be efficiently completed in a matter of minutes, achieving a 450-fold increase in speed.
Significance for Filecoin:
Faster Speed and Better User Experience: Transactions are completed in minutes, supporting low-latency applications and eliminating the long wait times previously experienced.
Expanded Use Cases and Accessibility: L2 subnets, such as Interplanetary Consensus (IPC), efficient smart contracts, and decentralized applications, as well as blockchain bridging for interoperability with other chains.
Ultimately, this enables Filecoin to enhance its usability across a broader range of applications.
2. Moving Beyond Storage with FWS
Filecoin Network Services (FWS) is a key concept that emerged this year, representing a strategic shift for Filecoin, expanding its scope from a primarily 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 cycle within the network. Here are reasons to pay attention to FWS:
Strengthening Filecoin's Competitive Advantage: FWS will introduce features such as programmatic SLAs (service level agreements automatically executed via smart contracts, ensuring clear performance expectations and penalties) and verifiable proofs (providing cryptographic evidence of service delivery, allowing users to independently verify service execution).
Expanding Filecoin's Capabilities: By adding Proof of Data Ownership (PDP), it goes beyond Proof of Replication (PoRep), enabling powerful hot storage use cases. PDP will help improve data retrievability, a key factor in achieving product-market fit, which has been widely discussed within the Filecoin community this year.
Positioning Filecoin as a Leading Platform in Decentralized Networks: FWS will facilitate the integration of multiple networks and protocols, creating a cohesive market for storage, computation, bandwidth, and other services, making Filecoin a key player in the development of decentralized networks.
FWS is currently a developing concept, with new storage services featuring PDP (v0) in development. Following this milestone, the development of the FWS market will begin, expected to launch in Q1 2025.
3. Unlocking New Value Streams for Filecoin
As a Layer 1 blockchain, Filecoin primarily generates revenue through gas fee burns (which occur when chain resources are used or fail). However, relying on gas fee burns as the main source of revenue is not scalable and, more importantly, increases operational costs and service costs.
A sustainable approach is to return value to the Filecoin economy through the services of the FWS market, thereby forming a more scalable and balanced revenue model. Proposed value accumulation mechanisms include:
FWS Fees: Charging a commission based on market transaction volume (%).
Service Fees: Charged when users utilize services or providers deliver services.
SLA Penalties: Imposed on service providers that fail to meet agreed performance standards.
This shift is expected to bring about a more robust and diversified revenue stream, ensuring Filecoin's continued relevance and profitability in an evolving market.
Final Thoughts
As the value of data grows, we look forward to advancements in privacy-preserving machine learning, data-driven business models, and the increasingly important role of AI agents in unlocking the potential of decentralized storage.
Looking ahead to 2025, with the upcoming launch of Fast Finality (F3) on the mainnet and the ongoing development of Filecoin Network Services, Filecoin will play a central role in shaping the future of decentralized ecological data and artificial intelligence. We hope to see these advancements allow Filecoin's positioning to transcend storage and unlock sustainable economic models through new revenue sources generated by FWS.
Feel free to follow @Filecointldr account or join our Discord for the latest updates on the Filecoin ecosystem.
Special thanks to HQ Han and Jonathan Victor for their review and valuable feedback on this article.
Disclaimer: The information above is for reference only and does not constitute investment, financial, legal, or other advice, nor does it represent an endorsement, offer, or recommendation for the use of any specific service, product, or application.
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