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Filecoin or Arweave – Which Storage Solution is Performing Best?
With the NFTs and blockchain gaming sector growing, the need for decentralized storage is increasing at a fast pace.
Already, the total market cap of the decentralized storage coin industry has reached $5.44 billion, according to CoinGecko. Some of the popular storage coins are Internet Computer (ICP), Holo (HOT), Siacoin (SC), Ocean Protocol (OC), and Storj (STORJ).
But what is decentralized storage? It is a blockchain-based decentralized peer-to-peer network.
Instead of relying on a single server under a centralized entity’s control, data here is saved on various nodes in a decentralized network. This creates a resilient file storage sharing system and increases security and reliability by ensuring the data is disseminated and safeguarded against errors and other potential risks. Decentralized storage solutions further allow users to completely own and control their data.
And two of the most popular decentralized storage solutions are Filecoin (FIL) and Arweave (AR). While both are data storage solutions with obvious similarities, such as being built on blockchain technology and decentralized, Filecoin’s focus is a low-cost alternative to temporary storage, and Arweave is building a long-term data storage solution.
Today, we will take a deep dive into what each of these solutions has to offer and how they differ from each other. So, let’s get started!
What do Filecoin and Arweave Offer?
Decentralized storage systems offer numerous benefits over traditional centralized storage systems, such as reduced costs, increased security and accessibility, data privacy, and improved reliability.
Both Filecoin and Arweave aim to disrupt traditional, centralized data storage products and services like Amazon Web Services and Google Drive. Unlike centralized data storage providers, these platforms implement publicly verifiable, trustless storage products that do not rely on a single entity.
So, let’s look at the two most prominent decentralized storage platforms.
Click here to learn how to buy Filecoin (FIL) in just 4 Steps.
Filecoin (FIL)
The Filecoin protocol is a decentralized peer-to-peer file storage network that aims to let anyone store, retrieve, and host digital information.
Filecoin was launched in October 2020, and a year later, it became the official storage provider for Flow blockchain. The network was founded by computer scientist Juan Benet and his team at Protocol Labs.
Benet started Protocol Labs in May 2014, and in 2017, the Labs raised over $250 million through a combination of private and public sales. Benet also developed the InterPlanetary File System (IPFS).
Filecoin Foundation, meanwhile, is an independent organization that focuses on the development of Filecoin as well as performing off-chain governance for the blockchain.
According to the official website, the protocol introduces a decentralized storage network (DSN) based on blockchain. Within this scheme, multiple independent storage providers offer data storage and retrieval to Filecoin network clients.
To handle storage and retrieval requests, the Filecoin DSN uses two verifiable markets, the Storage Market and the Retrieval Market, respectively, which have the same structure but different designs.
In the Storage Market, miners and clients submit their orders to record the same in the orderbook, and when the orders are matched, both miners and clients sign a deal order and submit it to the orderbook. Miners then settle the order by generating proofs of storage and submitting them to the blockchain.
In the Retrieval Market, clients and retrieval miners submit their orders to the orderbook by “gossiping” their order. And when matched, the client and the retrieval miners establish a micropayment channel.
For statement, retrieval miners send pieces to the client, and for each piece, the miner gets a signed receipt from the client, which is then presented to the blockchain for rewards.
The network uses two types of consensus protocols — proof of replication (PoRep), which allows storage givers to prove that data is stored to its own dedicated physical storage by creating unique physical copies, and proof of spacetime (PoSt) which allows storage providers to prove that they stored some data over a specified amount of time and penalized if they fail to prove the continued storage of the data to ensure good behavior.
Today, the Filecoin protocol has been utilized by several layer 2 solutions. Filet Finance, STFIL, Bifrost Liquid Staking, SFT protocol, and GLIF Infinity protocol are some applications built on Filecoin.
Click here to learn all about investing in Filecoin (FIL).
Arweave (AR)
Led by Samuel Williams and built on blockweave technology, Arweave is developing an underlying network where data can be stored forever and accessed on its secondary layer, where data is accessible through web browsers.
This data storage protocol was launched in June 2018. Initially known as Archain, the project released its original whitepaper in 2017. So far, the project has raised a total of $22 million in funding over 9 rounds.
Arweave is a blockchain protocol that allows users to store data permanently for a one-time fee. It uses a permanent web of pages and applications on top of the core protocol known as Permaweb. This layer which stays active forever, is claimed by the network to be the evolution of the traditional web where the knowledge base can be replicated perpetually.
Besides storing permanent data, the Permaweb protocol will also host dApps which are governed by individual codes. Developers can also deploy profit-sharing communities (PSCs) in these dApps.
According to Arweave’s whitepaper, the protocol is built on four fundamental technologies: Blockweave, Wildfire, Blackshadows, and Proof of Access, which together help enhance the new blockchains’ throughput as well as reduce costs and build permanent storage.
Blockweave involves two main components — a hash list, a list of old block hashes or mathematical puzzles that miners need to solve to validate blocks, and a wallet list, which lists all active crypto wallets in the ecosystem. Both lists together allow nodes to complete network functions without possessing the entire chain. They further allow nodes to join the network and immediately participate in the mining process.
Arweave uses this system to verify old blocks, evaluate new ones, and execute transactions without interacting with previous ones.
Wildfire is used by the Arweave network to tackle the issues related to data sharing within a decentralized network. Meanwhile, wastage of data is reduced with the help of Blackshadows, which also enhances block speeds by sending shadow blocks to the nodes rather than a whole block.
As for the consensus, Arweave uses Proof of access (PoA), an algorithmic consensus mechanism based on the proof-of-work (PoW) architecture. This mechanism incorporates data from an old block chosen randomly to generate new blocks in the network.
The protocol is used in different ways by the likes of Meta (formerly Facebook), Metaplex, Mirror, and Instagram.
Click here to learn all about investing in Arweave.
How do Filecoin and Arweave Differ?
Both Arweave and Fileocin are building decentralized storage solutions based on blockchain technology, but their focus is not the same. While Filecoin is more focused on incentivizing large-scale storage, Arweave is all about long-term data storage.
When it comes to payment models, Filecoin uses a tiered system that is based on storage time and space requests. Meanwhile, Arweave only charges a one-time fee to store data forever.
Moreover, new types of permanent applications can also be built on top of the Arweave protocol. These permanent web profit-sharing applications have the same attributes as Arweave itself in terms of being permanent, based around a token, governed by the community, and having economic incentives. ArDrive, Redstone, Verto, ArGo, Koii, and Pianity are some of the applications already launched on the platform.
Meanwhile, Filecoin launched its own Filecoin Virtual Machine (FVM) in March 2023, which brings programmability to the project. With FVM, the protocol aims to release a new potential of an open data economy.
Both solutions serve different kinds of users. If you only need to keep your data for shorter periods of time and are fine with paying on a month-to-month basis, Filecoin is the right service for you. Meanwhile, for your long-term permanent storage needs, Arweave is the right solution.
So, while Filecoin is ideal for large-scale storage solutions, Arweave is for long-term data accessibility. Ultimately, it depends on a user or organization’s specific needs.
How Have FIL and AR Been Performing?
FIL is a utility token and the native cryptocurrency of the Filecoin network. One can use it as payment for services like storing, retrieving, and hosting digital information on the network.
Filecoin users pay fees to storage miners for storing their files on the network, while anyone can participate as a storage provider and receive the FIL rewards for offering their storage capabilities to others.
FIL is the 32nd largest cryptocurrency with a market cap of $1.9 billion. As of writing, FIL has been trading at $4.52, managing $190.56 million in 24-hour trading volume. The token is down 15% in the past week, 60% in the past year, and 98% from its all-time high (ATH) of almost $237 hit in April 2021. In 2023, so far, the coin is in the green by 46%.
In comparison, the AR token has a market cap of $342 million, putting it at 113th rank. As of writing, the token is exchanging hands at $6.80 while managing $22.8 million in the past 24 hours.
The token is down 13% in the past week, 62% in the past year, and more than 92% from its Nov. 2021 peak of nearly $90. While AR’s losses are not as pronounced as FIL, the coin’s YTD gains are also much lower at just 7.6%.
AR cryptocurrency powers the Arweave protocol. It is used to pay tips, miners fees, endowment fees, and other types of payments on the network that allow access to the dApps built on the protocol. Clients also use the crypto asset to submit information on the network, while the servers need to hold a certain amount of AR tokens to process requests for writing data on the nodes.
There is healthy competition between Filecoin and Arweave, which is critical for effective, efficient, and innovative solutions for users and the success of the decentralized storage space. With data increasingly becoming valuable and privacy concerns growing, the demand for decentralized storage solutions will only grow, and both these projects stand to benefit from this in the future.
