Filecoin: a decentralisation case study

By September 13, 2021News

Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice. 

The world needs more digital data storage. There is also growing demand for this storage to be in the hands of everyone – not a handful of tech giants. This is where new entrants to the worlds of cloud storage and blockchain are bringing disruptive solutions, offering promising returns to investors and rattling established players in the process. In this article, we wanted to focus on a case in point: Filecoin, and how it is bringing a cooperative, decentralised and (in many cases) cheaper approach to pressing global problems.

We hope you find this content useful. To find out more about our EIS and other investment opportunities, visit our portfolio page here. To enquire regarding our latest projects and funding (for investors and founders, respectively), you can reach us via:

+44 160 334 0827

 [email protected]

 

Filecoin: a brief history

Investors were excited about Filecoin running up to its launch. Within the first 30 minutes of the project’s initiation in August 2017, $200m was raised. The idea was simple and powerful. Create a world where people can store their information – and communicate with each other – without needing to rely on big tech companies (which amass this data for profit). This “decentralised web” (DWeb) vision is core to Filecoin, which seeks to place data storage back into the hands of ordinary people – making it harder to censor and easier to retrieve.

 

The decentralised web (DWeb)

In the 1990s, when the web first started to proliferate around the western world, you connected directly with your friends using desktop devices which communicated directly with each other. However, from the 2000s – under “Web 2.0” – all of this started to change. We started to rely on centralised services like Facebook, Amazon and Google. Using their cloud services, users were “walled in” when speaking to friends, family and even colleagues. The DWeb, therefore, is not about re-inventing the internet. Rather, it is about bringing it back to its initial vision so that we do not need to rely on large intermediaries which exploit people’s personal data.

 

Risks of centralisation

Data concentration in the hands of a few tech giants creates problems. First of all, users might feel like they have no choice but to communicate whilst their data is sold to third parties (i.e. for advertising purposes). This is not a healthy ecosystem for everyone to thrive in. Secondly, this creates greater risk of our data being hacked. If, say, Amazon’s AWS service unexpectedly shut down, then much of the world’s data and connections would be lost. 

Thirdly, centralised data storage opens up more opportunities for government censorship, surveillance and other abuses of power. In 2018, for instance, news emerged that Google was discussing the development of a “censored search engine” for China, called the “The Dragonfly project” – to try and give Google the chance of re-entering the Chinese market. Although the project was terminated in 2019, it was disturbing to many that the idea had travelled so far at all.

 

How Filecoin – and DWeb – are different

It seems pretty clear that the world needs an alternative for its data storage needs. There are at least two ways in which Filecoin – and other DWeb projects – are different. Firstly, the system is based on the idea of “peer-to-peer” (P2P) connectivity. In other words, your computer or device not only requests services – such as asking for a file – but also contributes these to other users on the network. Secondly, Filecoin and DWeb projects store and fetch information in a unique way. Typically, when we browse the internet we use links (http and https) to pinpoint the location of data, so our computers can then go there and retrieve it. Conversely, Filecoin uses “content” as the basis for data retrieval (rather than location). This allows data to be stored in multiple locations on different computers – rather than relying on one server, somewhere in the world.

 

All about blockchain

You likely have heard of blockchain from cryptocurrencies like Bitcoin and Ethereum, which use the technology as a secure way to provide a public, decentralised and transparent ledger of transactions. This encrypted technology is now forming the basis of projects like Filecoin, which are using it to record the movement of data. 

The basic idea here is, if you have spare storage on your PC or other device, then you can offer this to the Filecoin network (to store other’s data) and be rewarded in the cryptocurrency. Likewise, if you want to store your data on the network, you can find people who are willing to do it – and pay them in Filecoin. 

This, in theory, provides you with a very different (better!) experience of the world wide web. Rather than be bombarded with adverts as you browse, you engage in Filecoin micropayments. For instance, want to listen to a podcast someone else has recorded and uploaded to their website on the network? Pay a bit of Filecoin and you can listen. 

 

Invitation

Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:

+44 160 334 0827

 [email protected]