Source: Filecoin Network
Key Points
The Filecoin storage market saw growth in the first quarter of 2024, with a 9% increase in active trading volume compared to the previous quarter. Storage utilization increased from 18% in the fourth quarter of 2023 to 23% in the first quarter of 2024, while storage capacity decreased by 14% quarter-on-quarter.
By the end of the first quarter of 2024, over 2000 users had loaded datasets on Filecoin, with 508 users loading large datasets (exceeding 1000 TiB) representing a 9% increase quarter-on-quarter.
Following the launch of the Filecoin Virtual Machine (FVM) in the first quarter of 2023, the DeFi ecosystem continued to develop, with Pyth and Uniswap V3 (Oku.trade) launching in the first quarter of 2024, and GLIF deposits increasing by over 2 times quarter-on-quarter.
As of March 31, 2024, over 3400 independent contracts had been deployed on the FVM, representing a 26% increase compared to the end of the fourth quarter of 2023 when there were 2700 contracts. Meanwhile, the Total Value Locked (TVL) on the FVM exceeded 600 million USD in the first quarter of 2024, nearly doubling quarter-on-quarter, primarily due to liquidity staking.
In addition to developing the FVM ecosystem, Filecoin is focused on increasing enterprise application rates in the short term and developing DePIN partnerships in the long term to utilize idle computing resources.
Filecoin Basic Information
Filecoin is building a hardware market, with storage being the first service. Built on the InterPlanetary File System (IPFS), Filecoin prices storage using a provider market rather than a fixed pricing structure for transactions. A storage transaction is like a contract with a Service Level Agreement (SLA) where users pay providers to store data for a specified period.
To ensure data security, Filecoin uses an encrypted economic incentive model to periodically verify storage using zero-knowledge proofs. To incentivize storage providers to participate in storage transactions, Filecoin rewards them with the native token FIL. Storage providers are also subject to corresponding penalties if they fail to provide reliable online time or engage in malicious behavior.
For data retrieval, Filecoin users pay retrieval providers to access data. Unlike storage transactions involving on-chain payments, retrieval transactions settle off-chain payments using payment channels for faster retrieval. In addition to storage and retrieval, Filecoin aims to provide an open market where computing power can be contracted to run data, offering a more efficient alternative to traditional centralized storage.
Key protocol upgrades to enable data computing services include the Filecoin Virtual Machine (FVM) and the Interstellar Consensus. The Filecoin Virtual Machine, launched in March 2023, introduces Ethereum-style smart contracts to Filecoin, facilitating new use cases in areas such as liquidity staking, perpetual storage, and decentralized computing.
Performance Analysis
Filecoin blockchain is used for decentralized storage of data in the following ways:
Demand side, representing storage users who need data storage.
Supply side, representing storage providers with excess network capacity.
Network Aspect
The volume of data stored through active trading between storage users and providers measures the demand for Filecoin storage.
Storage Transactions
In the first quarter of 2024, Filecoin continued to adopt decentralized storage through growth in active trading. Through active trading in the first quarter, nearly 1,900 PiB of data was stored on the Filecoin network, a 9% increase compared to the fourth quarter of 2023's 1,700 PiB, and over 3 times the 600 PiB in the first quarter of 2023. 
Meanwhile, the daily volume of new transactions reached a historical high of 5 PiB/day in the third quarter of 2023, then continued to decrease by 11% to 3.3 PiB/day. Although new transactions are still growing, the quarter-on-quarter slowdown in new transactions corresponds to an overall decrease in storage provider rewards (see "Rewards" section below). Additionally, the increase in new transactions helps to improve Filecoin network utilization.
Storage Utilization and Capacity
Filecoin's storage utilization relative to total available storage capacity increased to nearly 23% in the first quarter of 2024, up from 18% in the fourth quarter of 2023. While this growth is a positive signal for Filecoin's adoption through active storage transactions, it must be placed in the context of network capacity.
In the first quarter of 2024, Filecoin's average raw byte storage capacity decreased by 14% quarter-on-quarter to 8.1 EiB. This metric has gradually declined since reaching a historical high of nearly 17 EiB in the second and third quarters of 2022, about two years ago.
The decrease in storage capacity is further reflected in the decline in the total number of storage providers. This metric decreased to approximately 3000 providers in the first quarter of 2024, after reaching a historical high of over 4100 in the third quarter of 2022.
In addition to storage, decentralized protocols are increasingly utilizing Filecoin to access idle computing resources. For example, the decentralized computing platform io.net integrated 1500 GPUs from Filecoin storage providers in December 2023, enhancing GPU computing power.
Storage Users
The decentralized storage network guide from Messari shows that Filecoin is currently suitable for providing cold storage solutions (such as archiving and recovery) for enterprises and developers. Its competitive pricing helps attract traditional enterprises seeking cost-effective alternatives for storing large volumes of archival data.
Relevant use cases include:
Banyan - focusing on packaging services to make it easier for enterprise users to get started;
Seal - focusing on providing storage gateways for large clients such as UC Berkeley, StarlingLabs, and Casper Network; Steeldome (youdaoplaceholder0) - focusing on enterprise data archiving, backup, and recovery. Some other efforts beyond cold storage are being driven by solutions from Lighthouse, RIBS, Retriev, and Flamenco, among other companies.
As of the end of the first quarter of 2024, a total of 2007 users have stored datasets on Filecoin, with 508 users storing large datasets (i.e., datasets larger than 1,000 TiB), representing a 9% increase from 465 users in the fourth quarter of 2023. To encourage usage through active trading, we offer various storage services, including NFT.storage, Web3.Storage, and Steeldome.
According to the Filecoin Client Explorer, major users include Starling Lab, NFT platform OpenSea, and Layer-1 network Solana. Other notable institutions using the Filecoin network are as follows:
- Victor Chang Cardiac Research Institute maintains and shares research data
- Democracy’s Library stores Internet Archive collections of data gathered at the end of administrations
- SETI Institute uses Filecoin to store astronomical research data
- UC Berkeley collaborates with Seal Storage for storing physical research
- GenRAIT uses Estuary to store critical genomic data on Filecoin
- Research center Starling Lab stores sensitive digital records of human history
- Ewesion (China's fastest-growing graphic file host) uses Filecoin for data storage
- DeSci Labs uses decentralized data storage on Filecoin to enable research to be replicated and independently verified by other researchers
- Opscientia (OpSci) enables scientists worldwide to easily share data by using Filecoin
- Destor and Seal Storage collaborate with Cyber SMART on an AI data integrity improvement research project. Cyber SMART is a collaborative organization funded by the National Science Foundation and industry members.
An overview of featured Filecoin users can be found here.
Retrieval
To meet storage retrieval needs, a Filecoin and IPFS content delivery network called the Saturn project has been developed and is currently running in closed testing. The Saturn project aims to provide retrieval services in the Filecoin ecosystem through fast and low-cost content delivery. Saturn node operators currently meet retrieval requests by earning FIL, but they are expected to transition to demand-based long-term incentives.
Meanwhile, the Station application brings decentralized retrieval to the desktop, while the SPARK and Voyager modules allow for retrieval checks on the network. In context, Station utilizes idle computing resources and provides FIL rewards. As of March 2024, the number of participants in Station's computing network exceeds 7700.
Saturn aims to provide reliable content retrieval for enterprises and crypto-native use cases. A recent user deployment example is Saturn providing retrieval support for the Solana NFT platform Metaplex.
With the completion of the trial phase, Saturn is expected to enter the upgrade phase. Once in this phase, existing CDN products will undergo transformation over the next few quarters and be relaunched as part of a more scalable, high-performance independent retrieval protocol with its own incentive system.
FVM Usage
The Filecoin Virtual Machine (FVM) was launched in the first quarter of 2023, bringing Ethereum-style smart contracts to Filecoin. One year after its launch, Uniswap V3 was deployed on FVM in the first quarter of 2024. The deployment of Uniswap on FVM allows developers to use ETH and USDC in the Filecoin ecosystem.
Binance recently announced the opening of FIL deposits after integrating with FVM. Previously, Sushi integrated with Filecoin and began utilizing Axelar and Celer for cross-chain communication. Meanwhile, the leading Solana oracle Pyth was launched on FVM, allowing Filecoin smart contract developers to use Pyth's price feed services, further supporting the development of Filecoin DeFi ecosystem.
As of March 31, 2024, over 3400 unique contracts have been deployed on FVM, representing a 26% increase compared to the end of Q4 2023, when there were 2700 contracts. At the same time, FVM TVL exceeded $600 million in Q1 2024, nearly doubling compared to the previous quarter.
According to FVM Explorer statistics, as of the end of Q1 2024, the total net deposits in DeFi amounted to 27 million FIL (approximately $256 million), primarily used for staking, liquidity staking, and DEX. The liquidity staking protocol GLIF accounted for the majority of deposits (52% as of the end of Q1 2024), followed by the SFT protocol (10%) and Repl (9%), with other protocols making up the remaining 29%. Additional context:
GLIF introduced a reward program to incentivize DeFi community participation.
Repl introduced a mechanism for earning rewards by locking FIL as a storage provider.
FILLiquid proposed providing FIL loans to storage providers.
Thetanuts Finance launched a FIL-covered call option insurance vault to earn returns.
Meanwhile, according to the FVM DeFi leaderboard, as of March 31, 2024, the total net borrowing in DeFi reached 17 million FIL (approximately $162 million). In Q1 2024, both monthly net deposits and borrowings showed rapid growth, consistent with the risk market. As FVM continues to develop, it may become the foundation for developing monetizable FVM data use cases.
Financial Aspects
Filecoin's revenue framework is similar to Ethereum's, as its Gas system is designed based on the EIP-1559 mechanism. The Gas system consists of network fees, compensating for the resources used by burning network fees. Both storage users and providers generate protocol revenue.
Revenue
According to Messari's revenue analysis, Filecoin protocol revenue includes the following four components:
Base fees - dependent on message congestion, required for any storage proof.
Batch fees - used for batch packaging of storage proofs.
Overestimation fees - used for optimizing gas usage.
Penalty fees - imposed when storage providers fail.
Despite the growth in Filecoin storage demand, fee revenue in Q1 2024 increased by 21% to reach $1.6 million. The decrease in storage capacity is reflected in the increase in penalty fees and batch fees. It is noteworthy that the base fee for storage transactions is just over $8400, consistent with the overall decrease in demand-side fees charged to users for decentralized cloud storage space. Organizations, including the Decentralized Storage Alliance (DSA), are actively working to reduce the cost of loading data on the Filecoin network by 40%.
Rewards
Filecoin rewards include:
Block rewards distributed by the network to storage providers.
"Tips" fees used to expedite transactions.
In Q1 2024, block rewards constituted over 99.9% of the supply-side revenue, while "tips" accounted for a very small portion. The new FIL token minting mechanism relies on the following two components:
Exponential decay model (30% of total): Block rewards are highest in the early stages to incentivize participation, and decay exponentially over time.
Baseline model (70% of total): Allocates block rewards based on increasing storage capacity.
The combination of these two models helps to maintain participation after the initial phase of block reward distribution (see exponential decay model) and continues to reward the additional value brought to the network by increasing storage capacity (see baseline model).
Driven by the rise in FIL/USD price, supply-side rewards increased from $55 million in Q4 2023 to $76 million in Q1 2024, a 39% growth. In terms of FIL, rewards decreased from 12.6 million FIL in Q4 2023 to 10.6 million FIL in Q1 2024, a 16% decrease. The exponential decay model and baseline minting model led to an overall decrease in FIL reward issuance.
In the coming quarters, FIL reward issuance may continue to decrease. For in-depth discussions and various simulations on future FIL issuance, please refer to Messari's recent research on FIL circulating supply.
Ecological Overview
The Filecoin ecosystem has been actively attracting developers and builders, regularly participating in activities such as hackathons, accelerators, sponsorship programs, mentorship programs, and growth support. These programs aim to help early-stage projects and teams grow, with the potential to receive funding support from Protocol Labs or its affiliated entities. The Filecoin ecosystem is committed to introducing diverse use cases ranging from data infrastructure, streaming media, metaverse, to gaming.
As of March 2024, the Filecoin Ecosystem Explorer includes over 160 known projects, which is a non-exhaustive community network project database. Most projects using Filecoin provide data services:
Banyan: Decentralized storage similar to web2, suitable for areas beyond enterprise archives.
Lighthouse: Permanent data storage service with one-time payment pricing model.
Numbers Protocol: Maintaining authenticity for digital media and generative AI.
Seal Storage: Immutable data storage solution.
Steeldome: Data protection and storage solution.
Fluence: Enabling developers to scale their Web3 projects.
EQTY Lab: Using cryptographic methods to verify snapshots of AI model lineages, leveraging decentralized technologies such as IPFS and Filecoin.
Tableland: Cloud database based on SQL.
Basinv2: Data management and collaboration used by Tableland, WeatherXM Network, and Bacalhau computer networks.
Wb3mine: Monetization of idle computing power.
Protocols focusing on media and entertainment include:
Mona: 3D art gallery in the metaverse.
Huddle01: Decentralized video conferencing.
OPGames: NFT minting related to gaming.
FileMarket: Web3 store builder and marketplace.
The following use cases aim to leverage Filecoin infrastructure to drive specific data requirements in various fields:
Cryptosat: Using mini-satellites to prevent side-channel attacks and achieve secure verification.
ZKsig NFT: Market access control.
DataMarket: Data purchase and settlement functionality.
Qualitative Analysis
Key Developments
V22 Network Upgrade (Dragon)
The scope of the V22 upgrade (Dragon) includes several improvement proposals:
FIP-0063: Switch to the new Drand mainnet network.
FIP-0074: Cancel automatic trade settlement based on Cron.
FIP-0076: Direct data loading.
FIP-0083: Add built-in Actor Events in verified registries, storage providers, and market participants.
Uniswap V3 Deployment
Following a successful governance vote in October 2023, Uniswap V3 (via Oku.trade) was deployed on the Filecoin Virtual Machine (FVM). The deployment was supported by Axelar as the deployer and bridge provider. Specifically, it allows bridged ETH and USDC to be used natively on the FVM, increasing the relevance of Filecoin to DeFi applications.
Solana Integration
The Solana team is working on archiving Solana's block history on Filecoin. Once completed, infrastructure providers, explorers, and data indexers will have easier access to Solana data. Solana will benefit from increased redundancy and enhanced security. Additionally, price information from the leading Solana oracle Pyth is now available on Filecoin network.
Fluence Supported by IPC
Fluence Network announced the launch of a decentralized computing platform powered by the Filecoin Interplanetary Consensus (IPC) (http://ipc.space/). The launch of IPC enables services such as aggregators, hot storage, and computing networks to be built on Filecoin. To help achieve this goal, the FVM uses efficient proofs to verify computational integrity and introduces faster capacity proof verification for loaders. With low transaction costs and fast finality, Fluence benefits from this partnership.
Pyth Prices on FVM
The leading Solana oracle Pyth has been launched on the FVM with over 400 data sources. Now, Filecoin smart contract developers can use Pyth price feeds, further supporting the development of the Filecoin DeFi ecosystem.
Key Events
FIL Dev Summit
The FIL Dev Summit continued its third edition at ETHDenver 2024, focusing on programmable storage for Filecoin, archiving use cases like Solana, and the upcoming innovation in the Filecoin hot storage layer.
IPFS in Space
The Filecoin Foundation (FF) announced in January the successful deployment of InterPlanetary File System (IPFS) for space communication, demonstrating the transmission of files from Earth to orbit and back. This demonstration was part of a collaboration with aerospace company Lockheed Martin.
Digital Art Archives
The Museum of Crypto Art launched the ROOMs Archive, a digital archive that permanently preserves snapshots as a digital gallery using Filecoin.
Key Governance Decisions
Retroactive Public Goods Funding
In recognition of contributions to the Filecoin network, the first round of retroactive public goods funding project FIL-RetroPGF-1 will reward 200,000 FIL (approximately $1.9 million). This program aims to provide funding for contributions that have impacted Filecoin through Optimism's retroactive public funding.
Summary
The Filecoin storage market continued to grow in Q1 2024, with active trades increasing by 9% quarter-over-quarter. Storage utilization increased from 18% in Q4 2023 to 23% in Q1 2024, while storage capacity decreased by 14% quarter-over-quarter. As of the end of Q1 2024, over 2,000 users loaded datasets on Filecoin, with 508 users loading large datasets (exceeding 1,000 TiB), a 9% increase from Q4 2023's 465 users. With the rise in FIL/USD price, rewards increased from $55 million in Q4 2023 to $76 million in Q1 2024, a 39% growth. In terms of FIL, rewards decreased by 16% due to the overall decrease in FIL issuance.
One year after the launch of FVM, Uniswap V3 was deployed on FVM in Q1 2024. The deployment of Uniswap on FVM allows developers to use ETH and USDC within the Filecoin ecosystem.
As of March 31, 2024, over 3,400 independent contracts were deployed on FVM, a 26% increase from the end of Q4 2023's 2,700 contracts. Meanwhile, FVM TVL exceeded $600 million in Q1 2024, nearly doubling quarter-over-quarter. Net deposits and loans in Q1 2024 showed rapid growth, aligning with the risk market. With continued attention on FVM, it will serve as the foundation for developing monetizable FVM use cases around data and computation.
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