Written by: Vasa (Vaibhav Saini) 

Initially Published At: https://medium.com/swlh/ultimate-guide-to-filecoin-breaking-down-filecoin-whitepaper-economics-9212541a5895

An In-depth Study on Filecoin Protocols

Filecoin introduces the concept of a decentralized storage network (DSN). DSN is a scheme that describes a network of independent clients and storage providers. DSN aggregates storage offered by multiple independent storage providers and self-coordinate to provide data storage and data retrieval to clients. Coordination is decentralized and does not require trusted parties: the secure operation of these systems is achieved through protocols that coordinate and verify operations carried out by individual parties. DSNs can employ different strategies for coordination, including Byzantine Agreement, gossip protocols, or CRDTs, depending on the requirements of the system.

DSN involves the implementation of 3 functions: put, get, and manage. Put allows clients to store data under unique identifiers. Get allows clients to retrieve data using the identifier. Manage orchestrates the network by measuring space available for rent, auditing providers, and repairing possible data faults. The Manage protocol is run by storage providers often in conjunction with clients or a network of auditors(this involves Byzantine Faults which are discussed below).


DSN has several properties. The first 2 are essentially required.



Optional Properties of a DSN:


Fault tolerance

There are 2 types of possible faults which a DSN should tolerate:



Consensus Algorithms

The Filecoin DSN protocol can be implemented on top of any consensus protocol that allows for verification of the Filecoin’s proofs. Proof-of-Work schemes often require solving puzzles whose solutions are not reusable or require a substantial amount wasteful computation to find.


Non-reusable Work: Most permissionless blockchains require miners to solve a hard computational puzzle, such as inverting a hash function. Often the solutions to these puzzles are useless and do not have any inherent value beyond securing the network. Some blockchains like Ethereum(executing smart contract logic) and Primecoin(finding new prime numbers) have tried to use some of the computational power to do useful work.


Wasteful Work: Solving hard puzzles can be really expensive in terms of the cost of machinery and energy consumed, especially if these puzzles solely rely on computational power. When the mining algorithm is embarrassingly parallel, then the prevalent factor to solve the puzzle is computational power.

Attempts to reduce waste: Ideally, the majority of a network’s resources should be spent on useful work. Some efforts require miners to use more energy-efficient solutions. For example, Spacemint requires miners to dedicate disk space rather than computation; while more energy efficient, these disks are still “wasted” since they are filled with random data. Other efforts replace hard to solve puzzles with a traditional byzantine agreement based on Proof-of-Stake, where stakeholders vote on the next block proportional to their share of currency in the system.

So, instead of wasteful Proof-of-Work computation, the work Filecoin miners do generating Proof-of-Spacetime is what allows them to participate in the consensus.

Useful work: We consider the work done by the miners in a consensus protocol to be useful, if the outcome of the computation is valuable to the network, beyond securing the blockchain.


Filecoin proposes a useful work consensus protocol, where the probability that the network elects a miner to create a new block (we refer to this as the voting power of the miner) is proportional to their storage currently in use in relation to the rest of the network. Filecoin protocol is designed such that miners would rather invest in storage than in computing power to parallelize the mining computation. Miners offer storage and re-use the computation for proof that data is being stored to participate in the consensus.

Modeling Mining Power

Power Fault Tolerance: In this technical report, Power Fault Tolerance is presented as an abstraction that re-frames byzantine faults in terms of participants’ influence over the outcome of the protocol. Every participant controls some power of which n is the total power in the network, and f is the fraction of power controlled by faulty or adversarial participants.

Power in Filecoin: In Filecoin, the power p of miner M at time t is the sum of the M’s storage assignments. The influence I of M is the fraction of M’s power over the total power in the network. In Filecoin, power has the following properties:


We also need mechanisms to prevent three types of attacks that malicious miners could exploit to get rewarded for storage they are not providing: Sybil attack, Outsourcing attacks, Generation attacks.



Storage providers must convince their clients that they stored the data they were paid to store. In practice, storage providers will generate Proofs-of-Storage(PoS) that the blockchain network(or the clients themselves) verifies.

To make the act of storage publicly verifiable, Filecoin introduces two consensus algorithms: Proof-of-Replication (PoRep) and Proof-of-Spacetime (PoSt). If you are new to consensus algorithms or want to know more about them, then head here:

Proof-of-Replication(PoRep) is a novel Proof-of-Storage which allows a server (i.e. the prover P) to convince a user (i.e. the verifier V) that some data D has been replicated to its own uniquely dedicated physical storage. Our scheme is an interactive protocol, where the prover P: (a) commits to store n distinct replicas(physically independent copies) of some data D, and then (b) convinces the verifier V, that P is indeed storing each of the replicas via a challenge/response protocol. PoRep improves on PoR and PDP schemes, preventing Sybil Attacks, Outsourcing Attacks, and Generation Attacks.

Proof-of-Spacetime: Proof-of-Storage schemes allow a user to check if a storage provider is storing the outsourced data at the time of the challenge. How can we use PoS schemes to prove that some data was being stored throughout a period of time? A natural answer to this question is to require the user to repeatedly (e.g. every minute) send challenges to the storage provider. However, the communication complexity required in each interaction can be the bottleneck in systems such as Filecoin, where storage providers are required to submit their proofs to the blockchain network.

To address this question, we introduce a new proof, Proof-of-Spacetime, where a verifier can check if a prover is storing her/his outsourced data for a range of time. The intuition is to require the prover to

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The prover receives a random challenge(c) from the verifier and generates Proofs-of-Replication in sequence, using the output of proof as an input of the other for a specified amount of iterations t. Thus ensuring that all of the work done is reusable(as discussed above).

PoSt & PoRep uses zk-SNARKS, making proofs are very short and easy to verify.

To know more about Practical implementation of PoSt refer to the Whitepaper.

Smart Contracts

Smart Contracts enable users of Filecoin to write stateful programs that can spend tokens, request storage/retrieval of data in the markets and validate storage proofs. Users can interact with the smart contracts by sending transactions to the ledger that trigger function calls in the contract. We extend the Smart Contract system to support Filecoin specific operations (e.g. market operations, proof verification).

Filecoin supports contracts specific to data storage, as well as more generic smart contracts:

Cross chain Interactions

Bridges are tools that aim at connecting different blockchains; while still work in progress, we plan to support cross chain interaction in order to bring the Filecoin storage in other blockchain-based platforms as well as bringing functionalities from other platforms into Filecoin.

Some Other Issues

Here we list a few potential issues which are not well discussed in the whitepaper.

Possible Improvements in Filecoin Protocol

Here we list some possible improvements in the filecoin protocol.

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Ultimately, the encryption-key and some information to help find the right Storage nodes become part of the “capability string” (read more about the encoding process). The important point is that a capability string is both necessary and sufficient to retrieve a value from the Grid — the case where this will fail is when too many nodes have become unavailable (or gone offline) and you can no longer retrieve enough shares.


There are write-capabilities, read-capabilities and verify capabilities; one can be diminished into the “less authoritative” capabilities offline. That is, someone with a write-capability can turn it into a read-capability (without interacting with a server). A verify-capability can confirm the existence and integrity of value, but not decrypt the contents. It is possible to put both mutable and immutable values into the Grid; naturally, immutable values don’t have a write-capability at all.