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In early July, Block.one’s EOS tokens launched at a record $185 million raised in five days. Earlier this month, the Tezos Blockchain Project shattered EOS’s record by raising $232 million in less than 14 days. A few days ago, the Filecoin ICO surpassed all records previously set – by raising nearly $200 million in the first hour of the offering.
Previously, Filecoin raised $52 million from around 150 Silicon Valley investors, like Sequoia Capital, Andreessen Horowitz, Union Square Ventures, and Winklevoss Capital.
Filecoin’s parent company, Protocol Labs, and AngelList partnered together to host the Filecoin ICO on CoinList. CoinList is a platform for companies to hold SEC-complaint ICOs.
What Exactly is Filecoin?
Filecoin is a cryptocurrency, like Bitcoin. Instead of using hashers though, Filecoin uses hard drives.
Blockchain and a native token power Filecoin. And eventually, Filecoin will power a distributed file storage system. Miners sell their storage to Filecoin, and Filecoin pays them whenever they sell storage space or are part of retrieval requests.
The cryptocurrency is used to pay for storage, file retrieval, and network transactions. Filecoin is the incentive structure, while InterPlanetary File System (IPFS) addresses and moves content throughout the network. IPFS is a peer-to-peer hypermedia protocol. When you add a file to IPFS, each file and all of the blocks within it get a unique fingerprint, called a cryptographic hash.
On the back-end, to save storage space and create a high efficiency, IPFS removes duplications across the network. It also tracks version history for every file.
Filecoin’s website goes through our current storage usage patterns. More data will be created in 2017 than ever before. But 50% of the world’s storage remains unused. With more supply, the price of storage drops.
Filecoin’s whitepaper on their proprietary Proof-of-Replication (PoR) function divulges more information into how Filecoin runs. PoR creates a useful and valuable storage service as a byproduct of the mining process. So there is incentive for miners to be efficient. And the more they store, the more Filecoin they earn.
Concerns with the Filecoin ICO
There are concerns about Filecoin’s advisor distribution. Many suspect that there will be a large valuation difference between the price per coin paid by advisors and the higher price that later investors could have to pay.
Filecoin responded saying, “The advisor sale involved an amazing group of technologists, researchers, entrepreneurs, engineers, designers, industry leaders, and investors. All of them are committed—vested—to work closely with us to make the Filecoin Network as valuable as they can, for years to come. Hence the discounted price.”
Other concerns include the method of ICO distribution. In the same vein of many previous ICOs, the Filecoin ICO worked on a first-come first-served. This opens up the possibility of network congestion or unfair price distribution, depending on payment confirmation times.
To combat this, Filecoin announced that all investments made in the first hour of the ICO will be averaged for fairness. The standard price increase would affect all investments not made in the first hour. After the first hour, the price increases with an increasing number of investments. That rising price will be visible to investors before they decide to participate. As of this writing, the Filecoin offering is at $4.95 USD/FIL.
Filecoin’s Plans for the Future
Filecoin’s priced their advisor sale at $0.75 per coin with discounts for extended vesting periods. The ICO started at $1/token, and it increased by $1 for every $40M USD raised, with a cap around $6 per token. FileCoin founder and Protocol Labs CEO Juan Benet explained that the offering’s increasing price feature will “price out” participants; they don’t expect all coin price tiers to sell out.
Since this is CoinList’s first ICO, they worked closely with lawyers to create a Simple Agreement for Future Tokens, which in itself is a security. Since the network isn’t launching for at least five more months, investors aren’t actually buying tokens right now. They are just signing a contract to receive them in the future.
Filecoin will be available to exchange with USD, BTC, ETH, and more. 70% of token allocation will go to Filecoin Miners for providing data storage service, maintaining blockchain, and more. 15% of tokens will go to Protocol Labs for research, engineering, deployment, business development, marketing, distribution, and more.
10% will go to investors for funding network development, business development, partnerships, support, and more. And the last 5% will go to Filecoin Foundation for long-term network governance, partner support, academic grants, public works, community building, and more.
As with all cryptocurrencies, we don’t know where Filecoin will go when it finally launches. But we’re excited to see how it all unfolds.