Filecoin’s history has been turbulent since its creation in the early days of the crypto-verse. But investors can probably agree that nothing resembles what happened last week.
Filecoin Traders Had a Hard Week…
Speculators are having a rough time. The token initially had a brief and sudden rise of more than 100% immediately after its launch. Traders, analysts, and Filecoin fans were debating everywhere about the project’s fundamental value and how it could revolutionize the world of content storage and distribution… until the dump happened.
After the initial hype, Filecoin has collapsed by almost 80% and has not recovered ever since. The cryptocurrency went from $131 to $35.38 in just 4 days, and the fact that some exchanges are not offering real tokens but IOUs doesn’t help much to calm traders’ nervousness either. It is important to remember that tokens need to go through a vesting process before launching on the network.
But if the speculators are nervous, the miners are even more so. During its first week of life, Filecoin has revealed to be unprofitable for mining, and the maintenance of the network is becoming more and more difficult.
…But So Did Filecoin Miners
Twitter user Nico Deva explains in an extensive thread the tragedy being experienced by those responsible for bringing the network to life. In short: the miners have to invest a lot in the acquisition of equipment and servers. Still, at the same time, they are forced to buy more tokens to increase their capacity. And this is not good because the idea of a business is to earn, not to spend.
“One miner, sealing 1TB/day since 8/27 calibration start, who has sealed about 50TB at mainnet launch on 10/15 (about 1/7 of total capacity), needs 5 FIL/TB =5FIL/day as collateral to keep increasing until reaching full capacity.
Current mining returns hover around 0.25-0.27 FIL/day (filfox.info/en/ranks/power)
This mining reward is vested for 180d (as per the SAFT agreement)
So our 50TB miner is on ramp up to mining capacity but also on ramp to full returns. While on ramp, as of 50/180 days, he gets 50/180 of the reward or 0.075/TB/d, 3.75 $FIL for 50TB. Wait, is that below the 5$FIL/day to keep sealing?
Right, miners need to *buy* to keep ramping up to full capacity, or just stay at 1/7 capacity.
Why can’t a person just add more storage to the network until they make their business profitable? Basically, this is what differentiates a centralized server (like Amazon services) from a decentralized one. For a miner to prove they have the right space allocation and data storage, they have to “seal off” that space as part of a process called Proof-of-Replication (PoRep), and that takes time… which miners don’t have.
The network’s complex nature has raised investors’ nervousness to the point where apparently people are starting to talk about forks, scams, and other kinds of unpleasant epithets.
Here in China people are disgusted, 恶心, this is the word repeated. A napkin calculation shows you early on that your mining system that requires $20k hardware also forces you to *buy* more coins. In a country where ponzinomics is an art, the 2017 poster boy just ble it (11/n)
— Nico Deva (@NicoDeva_) October 18, 2020
For now, Filecoin is trying to calm down the waters with a 5-day event starting tomorrow. The “Filecoin Liftoff Week” tries to get a clearer path to the future and has invited several high caliber speakers such as Joe Lubin, founder of ConsenSys and one of the co-founders of Ethereum.
Will this be enough to calm investors? Probably not, but in the world of crypto, you never know.
The post Filecoin Plunges 80% in 4 Days While Miners Suffer the Most appeared first on CryptoPotato.
