B.E. Ventures Research Report: A Comprehensive Overview of the Six Major Tracks in the Filecoin Ecosystem

Author: B.E. Ventures

On April 9, 2014, at 2:02 AM local time, Y Combinator received a project application from a Stanford guy named Juan Benet regarding a peer-to-peer hypermedia network protocol. Also that summer, a milestone event occurred: the initial token issuance of Ethereum.

In 2015, amid anticipation, frustration, and controversy, the IPFS protocol was finally born, launching a decentralized challenge to the ancient and massive HTTP under the name of Interplanetary. That year, Bittorrent, which once accounted for over 40% of internet traffic, seemed to have become an ancient legend. Yet Juan Benet said, "The 21st century is the summer of peer-to-peer networks."

On October 15, 2020, the Filecoin mainnet launched at block 148,888, marking the arrival of Filecoin after three years of preparation. In just one year, enthusiastic capital waves, developers, storage providers, and massive data flooded in, with computing power quickly surpassing 12EiB, over 3,000 global storage providers, and more than 7,000 developers contributing to over 450 projects in the ecosystem.

On October 15, 2021, the Filecoin mainnet celebrated its first anniversary. On this commemorative day, we attempt to outline the state of Filecoin's ecosystem construction through this article, while once again reflecting on the official website's statement: "A decentralized storage network, born for humanity's most important information."

We believe:

1. The core of the Filecoin ecosystem is the reshaping of data value, including data ownership, data circulation chain, data asset pricing, and value transfer methods.

2. Centralized storage and decentralized storage will coexist for a long time, and user experience-oriented users need more integrated storage service platforms. Filecoin should further optimize experiences in storage, retrieval, and more.

3. The NFT track is a natural advantage for Filecoin, requiring more effort in community building and user acquisition.

4. Due to the design of Filecoin's economic model, the endogenous DeFi serving storage providers' assets and computing power has vast potential, with lending services and computing power NFTization worth further exploration.

5. Video is a hot track in the Filecoin ecosystem, and its underlying technologies such as encoding, decoding, and CDN construction require more decentralized exploration.

I. Ecosystem Participants

Any ecosystem construction should serve the participants within it. In its official white paper, Filecoin categorizes its construction participants as: storage providers, users, token holders, and research developers. Additionally, referencing the development patterns of other public chains, the Filecoin ecosystem can theoretically be divided into the following categories based on the logic of building underlying infrastructure, underlying networks, and application development:

Serving Storage Providers: As Juan Benet mentioned, the DeFi needs of storage providers should be emphasized, such as financial needs for assets like staking, computing power, data, and machines. For example, projects like Hashmix address the current issues of storage providers borrowing funds and investors participating more flexibly in Filecoin's computing power packaging.

Serving Storage Users: Storage applications (slate, space, chainsafe files), search applications (myel, consensys, nbfs, etc.), transaction matching (Filwan), NFT storage (NFT storage), data economy (wolfram, ocean, filehive, ownership labs, numbers Protocol, etc.), video/live streaming (videocoin, huddle01, NonEntropy Tech, livepeer).

Serving Token Holders: DeFi (secured finance, atomica script), cross-chain services.

Serving Developers: Developer tools (powerloom, textile, fleek, truffle, fission, orbit db, nethereum, valist, infinite scroll, open rcp).

II. Key Areas

1. Data Value and Ownership

Looking back at the traditional internet's path regarding data assets, it has gone through a process from business data to data business, where business data primarily served the need for refined management within traditional enterprises, while data business involves the external commercial use of data. This raises several issues: First, unclear ownership of data assets; second, users' personal information being misused by platforms and stolen by third parties; third, data monopolization by large internet companies; fourth, the absence of a public and transparent data asset trading market, how to price data assets, compounded by the rampant spread of fake news and propaganda, algorithmic isolation, and the alienation of humanity by algorithms, severely eroding the basic competitive order and fairness of information, contrary to the spirit of the internet.

In September 2018, Gavin Wood published an article titled "Why We Need Web3," stating that Web3 is the only way to solve the above problems. Reflecting on thirty years of the World Wide Web, Web1 aggregated information, Web2 connected humanity, and Web3 will reshape all value, promoting the transformation of the internet from an information database to a value warehouse—returning to the essence of the internet spirit.

What exactly is Web3?

No one can define it, not even Gavin Wood. When people truly describe their vision of Web3, "decentralization," "ownership," "equality," "sharing" are certainly high-frequency keywords. The truly valuable aspect is that Web3 is determined by those who love to imagine and build it, with infinite possible future scenarios—only one thing is certain: regardless of how Web3 evolves, the two key elements of computation and storage remain its unchanging anchors. As a decentralized storage solution, Filecoin inherently possesses the power to combat knowledge monopolies, algorithmic exploitation, and internet oligopolies, and reshaping the value forms of data and information is Filecoin's endowment and mission.

1.1 Data Market

DeFi ignited the Ethereum community, and NFTs redefined "ownership." Whether on Ethereum or other Ethereum sister chains or Ethereum killer chains, the capture of blockchain value currently stems from transactions, i.e., financial data. Filecoin, focusing on storage, should open up a new realm beyond financial data.

Although cultivating awareness of data ownership, data assets, and data economy and changing consumption behavior is a long-term process, it should be a primary direction for Filecoin's future, as it could lead to the birth of more unique applications within the IPFS ecosystem.
Currently, Ocean Protocol is one of the most advanced and beneficial explorations in the data economy field.

Ocean Protocol has built a data market on Filecoin. Data tokens can easily be used to publish and consume data services. It has also established a decentralized exchange specifically for data services, Ocean Market, which currently has a TVL of 3.5 million, with 456 pools, each representing a purchasable dataset. The most liquid pools currently include on-chain data and e-commerce data (consumer behavior data).

Additionally, Ocean Protocol has forked a Balancer AMM to reduce gas costs. In this market, users can publish, purchase, sell, consume, and stake data. Through Filecoin, users can utilize Ocean to initiate their own Filecoin data market or create a Filecoin data DAO or index fund.

Filehive is another open-source website for datasets that integrates uploading, maintaining, purchasing, or donating functions. It incentivizes the storage and authorization of datasets using the Filecoin network, allowing datasets to be retrieved from the IPFS network. Individuals or organizations uploading datasets can choose to share them for free or apply for paid access in Filecoin, and donation functions are also supported.

What insights does Ocean Protocol provide us?

First, capturing, monetizing, and reconstructing data value using DeFi logic—this may represent a trend for future data markets; second, how to define the value of data, including scarcity, timeliness, granularity, completeness, accuracy, multi-structurality, dimensionality, and economic value of application scenarios. Yes, the same dataset can be subject to complete price discrimination for different consumers, and a dynamic pricing mechanism is needed—let's leave it to the market; third, the essence of data commodities—should it be more like ERC20 or ERC721? If the latter, data assets should consider being made into NFTs.

1.2 Data Sovereignty

As Tim Berners-Lee, the father of the World Wide Web, advocates, everyone should have control over their own data; all information should be accurately disseminated without miscommunication; information should be complete, promoting transparency in political advertising.

A core characteristic of Web3 is decentralization, anti-censorship, and data sovereignty. Filecoin collaborates with influential NGOs, news media, and art organizations to jointly protect the circulation and preservation of valuable human information.

Starling Labs is a research laboratory co-founded by the USC Shoah Foundation and Stanford University, using the latest cryptography and decentralized network protocols to store data and memories that should never be forgotten in human history, dedicated to developing new tools that help reduce uncertainty in digital media and create tamper-proof historical records.

The core of its solution is the Starling Framework built on IPFS, enabling organizations to utilize the capabilities of cryptography and distributed systems to authenticate digital videos and images. Starling has three modules: capture, storage, and verification. In collaboration with Reuters, it recorded the 78 days of the Trump administration's transition to the Biden administration, where reporters instantaneously hashed metadata and sent all information back to Reuters, forming an immutable information chain to verify that each photo was indeed taken at the location and time claimed by Reuters.

Additionally, Starling Labs collaborates with the Taiwanese team Numbers Protocol to enable every user to create secure, verifiable digital assets, helping users create tamper-proof records of media content. Currently, there are products like Capture with a certain level of daily active users. The pain point that Capture addresses is: if you are a photographer or illustrator, anti-plagiarism and anti-theft become part of your daily routine, which is a tedious and helpless task because it is difficult to trace or verify images, and the lack of a rights confirmation mechanism causes creators to lose many monetization opportunities.

Using Capture, at the moment of taking a photo, ownership and shooting environment information will be recorded simultaneously. The information is sealed on the blockchain, and within seconds, the photo will be protected and can be monetized at any time. Even if others share and download the image via the internet, the information will still be bound to the photo, ensuring traceability. Furthermore, protected photos can be directly sold in a self-managed asset store within Capture without additional complex operations.

Another interesting project is Ownership Labs, an open data market for secure, verifiable private data computation, which aims to make the data flow chain transparent, thereby designing traceable computation and hierarchical aggregation data service specifications. The project is still in development, with the basic logic being: users can define the datasets to be shared and tokenized by accessing asset templates, and then aggregate these datasets into a union. Data buyers can then track the data lifecycle and perform aggregated computations.

1.3 Identity Authentication

Filecoin as a distributed storage solution provides a better exploration direction for decentralized identity in Web3—complete ownership, full privacy, and better convenience.

The current centralized architecture of the internet inherently carries the risk of identity privacy leakage. Recently, on October 4, Facebook and its subsidiaries Instagram and WhatsApp experienced a massive outage due to an engineer's erroneous command, with reports suggesting that data from over 1.5 billion Facebook users was being sold on a popular hacker-related forum, including users' names, emails, phone numbers, locations, genders, and user IDs.

Of course, decentralized identity is not a necessity of blockchain, but it is an extremely important infrastructure for Web3. It can be said that the development level of decentralized identity authentication defines the form of existence for participants in the Web3 network and directly affects the ways of participation and value distribution in various ecosystems.

For example, in DeFi, participants exist in the form of "addresses," so we are not ourselves; we are merely a string of characters isolated on a specific blockchain. We do not fully own our assets; it is our private keys that hold them, which eliminates the need for KYC but also brings many issues: we are forced to over-collateralize, how do we cross-chain, how do we better govern DAOs to achieve "one person, one vote," and on what basis do we believe that NFTs truly belong to us?

The conclusion is: decentralized identity authentication is at the core of decentralized governance, DeFi trust issues, and complete ownership.

Among the various explorations of decentralized identity, Microsoft's three-layer solution may be the most foundational and aligned with blockchain user habits. Microsoft has announced a partnership with IPFS, and it is expected that Filecoin's related explorations will also be based on this solution.

ION — Microsoft's exploratory solution ION is a public identity network that provides decentralized public key infrastructure through decentralized identifiers (DIDs) and the Sidetree protocol on top of the Bitcoin blockchain. ION was developed by a group of collaborators from Microsoft and the Decentralized Identity Foundation. The core of the solution is hierarchical:

Protocol Layer: Sidetree, deployed on networks like Bitcoin and Ethereum (currently only deployed on the Bitcoin network);

Network Layer: ION, which aggregates a large number of DID operations into a single on-chain operation through batch merging on Layer 2, and achieves trustworthy storage of DID data by storing data on IPFS and keeping the hash of the data on the Bitcoin network;

Application Layer: Generates unique identifiers and related DID documents. The former is a label for the latter, which contains information such as what the DID can authorize and in which services the DID can be used.

Metaverse AI is a project incubated by the Filecoin Foundation, based on the aforementioned Sidetree protocol, focusing on establishing a persistent and trustworthy identity layer for the Metaverse and VR/AR universe. It supports real identity ownership for cross-chain virtual experiences (including VR and the metaverse) while securely and decentralized storing all data to prevent data leakage.

2. Storage Convenience

Based on current observations of centralized exchanges (CEX), we believe that during the transition from Web2 to Web3, extreme decentralized solutions may not be the market mainstream. Users who are not particularly sensitive to the concept of "decentralization" will pay more attention to usability, convenience, and cost-effectiveness. Therefore, storage service providers like Pinata and Filebase, which represent Web2.5, will serve as a transitional bridge for a period.

Users are not loyal to a specific chain; they are loyal to their user experience. Pinata and Filebase, as front-end customer entry points, choose from related storage service solutions like Filecoin, StorJ, Arweave, and Amazon Cloud based on customer preferences, matching user needs, such as Filebase's compatibility with the Amazon S3 protocol. Cultivating user habits is a long-term process, and decentralized storage needs to accelerate the transition to Web3 with lower storage costs, more convenient retrieval, smoother experiences, and stricter privacy protection. We will ultimately defeat the Leviathan that seeks to control everything.

To enhance the usability of IPFS and make it user-friendly, facilitating developers to build new projects, Slate is an open-source storage system based on Filecoin that allows for uploading, searching, and sharing personal data. Chainsafe's Chainsafe Files establishes a highly secure and privacy-protecting file storage service, providing an intuitive user experience. Another focus is to significantly improve the matching efficiency between storage demand and storage service provider nodes, enabling users to quickly find trustworthy storage providers, and establishing a sound system for screening and selecting storage providers for order-taking, such as Filswan.

Additionally, Juan Benet has repeatedly mentioned the concept of a storage auction house, expressing his fondness for this idea, where storage content is auctioned, and storage nodes bid, with the highest bidder winning. For high-quality data, some nodes may choose to offer free storage.

3. NFT Storage

Juan Benet once stated, "NFTs that are not stored on IPFS do not truly belong to you."

NFTs themselves require a large amount of storage space. Currently, the common practice is to store transaction records on-chain and media (images/videos, etc.) off-chain. Many centralized NFT marketplaces, although utilizing decentralized storage like Filecoin, actually host these files through their own private gateways acting as nodes. Essentially, the marketplace still maintains the relevant nodes. Although such incidents have not yet occurred, if the relevant marketplace stops maintaining these nodes, would the NFTs be lost? This contradicts the core of complete ownership of NFTs.

If I want to purchase and fully own an NFT, I should have an immutable transaction record and a storage node completely maintained by myself. For example, if I buy a CryptoKitty on OpenSea, I should be able to destroy the NFT hosted by OpenSea with one click and regenerate an identical version on IPFS—this NFT will completely belong to me. Alternatively, at least within the Filecoin ecosystem, there should be endogenous NFT projects that allow for one-click minting and trading of NFTs, such as the NFT Storage launched by Protocol Labs.

At the same time, leveraging the Fandom economy to introduce well-known IPs and accelerate the flourishing of the NFT market, projects like Curio Digital utilize IPFS to tokenize well-known IPs. They have currently partnered with the TV show "American Gods," the comic book brand Concrete Park, and Heavy Metal. The team is also in discussions with Universal Records, seeking collaboration opportunities with Metallica, Paul McCartney, Grateful Dead, and the 007 film franchise.

4. Endogenous DeFi

Due to the characteristics of Filecoin's pre-staking and delayed release, there is a higher computing power threshold and relatively high capital costs. Addressing the liquidity needs of storage providers' assets has become an essential part of the Filecoin ecosystem.

Interest rates are at the core of DeFi, with star projects in this field including Secured Finance, which offers peer-to-peer fixed-rate loans, collateral management services, cross-asset swaps, and various interest rate products. Atomica Script is a decentralized finance automated insurance market platform, and Canza is a project targeting the sub-Saharan African region, providing financial services to local currency brokers.

Computing Power DeFi is another area worth exploring within the Filecoin ecosystem. To solve the decentralized verification challenges of large-scale storage, Filecoin proposed using zero-knowledge proofs for verification. However, this method consumes a significant amount of computing power, making the cost of storing application data higher compared to projects like StorJ, effectively excluding many small storage devices.

How can we leverage DeFi thinking to activate the vast computing power within the Filecoin ecosystem? Juan Benet once proposed the idea of hard drive futures, and Hashmix has previously engaged in related construction of computing power DeFi, connecting the needs of computing power investors, fund lenders, and storage providers through the NFTization of computing power, launching combined lending and packaging products that effectively enhance the liquidity of computing power.

5. Video/Live Streaming

With the development of hypermedia, the evolution of information media from text and images to video is an irreversible trend. Also, consider the trajectory of the NFT craze: avatars, jpg images, code, txt documents, music—video may be the next frontier. How many ETH could an NFT of Marilyn Monroe's birthday song auction for? What should an NFT of a silent film by Charlie Chaplin be worth? Forbes has speculated on the potential of video NFTs, mentioning the Videocoin project, which has integrated with Filecoin to build the first platform specifically for creating and trading video NFTs. Voodfy is another decentralized video platform that allows creators to host content and profit in their own way, benefiting individuals or companies eager to monetize knowledge but concerned about piracy affecting their revenue.

At the same time, the Filecoin Foundation is also addressing issues related to underdeveloped countries' poor network infrastructure and uneven educational resources, with online video education becoming an exploration direction. For example, the Indian team is promoting Huddle 01, an online classroom platform optimized for video conference participation, and NonEntropy Tech, an online learning platform centered around video.

The massive requirements for storage, memory, and bandwidth inherent in video lead to a natural preference for centralized solutions. Research reports indicate that users' tolerance for video buffering is significantly lower than for other media types, such as text and images. Users may wait five seconds for an image to load, but they find it hard to tolerate occasional one-second video buffering. Filecoin's efforts in this domain require more decentralized thinking to solve technical issues, and this is also an exploration of Web3 infrastructure construction.

For instance, the issue of content distribution efficiency should be addressed. The myel project supported by the Filecoin Foundation focuses on establishing a decentralized content distribution network for Web3. Secondly, the issues of encoding and decoding should be packaged. Livepeer is one approach that distributes encoding tasks to nodes on the network, where nodes earn rewards by staking tokens and completing encoding tasks, thereby providing services to end video users. Users can earn Livepeer tokens by executing video transcoding, currently implemented through Ethereum smart contracts, using Swarm for storage, and will later integrate with the Filecoin network.

Additionally, there is a need to design better community incentive mechanisms to add quality content and attract more excellent creators, such as KOLs and internet celebrities in traditional networks, with token incentives and tipping mechanisms for creators to better realize traffic monetization. Lino Network and Theta are good examples.

6. Infrastructure

Observing the development trajectory of Ethereum, the ecosystem is largely driven by a spiral of developer engagement, where more application innovations attract more users and resources, thereby siphoning in more excellent developers and creating a better and more comprehensive ecosystem. Many projects within the Filecoin ecosystem facilitate developers, such as Textile, Truffle, Fission, Orbit DB, Nethereum, Valist, Infinite Scroll, Open RCP, Ganache, etc., providing lightweight APIs, universal protocols, and one-click deployment, allowing developers to focus more on breakthroughs in core technologies, optimization of smart contracts, and refinement of business logic.

Powerloom is another interesting project aimed at solving trust issues in DeFi smart contracts. We benefit from the concept of Lego blocks, where numerous innovations yield more than the sum of their parts, but this also brings some challenges, such as the increasing complexity of DeFi development and smart contracts, requiring developers to spend significant time on verification. Powerloom aggregates on-chain and off-chain data to generate snapshots with cryptographic proofs in a decentralized manner, storing snapshot data as hot storage on IPFS and anchoring it on the Filecoin network, establishing trust through a rich ecosystem that incentivizes peers and stakeholders participating in the protocol and providing meaningful insights based on demand.

Conclusion

The Filecoin mainnet has been live for a year. In this year, the evangelists of internet freedom, victims of value monopolies, opportunists, and idealists have floated amidst the noise, values, and bubbles. However, regardless of who they are, when they look up at the flourishing internet of the late 20th century, at the hard drive wanderers after the fall of Bittorrent, if they happen to resonate with the spirit of the internet, data sovereignty, and open networks, if they value anti-censorship and anti-monopoly, then servers, closed-source, winner-takes-all, or Facebook should all be defined as a deviation from the internet's true path.

On Filecoin's first anniversary, fortunately, we have decided our future direction, and we will reshape everything about value. The internet is forever in self-rescue.

Note: This article is an original piece by B.E. Ventures. All rights belong to B.E. Ventures. Unauthorized reproduction is prohibited, and violators will be held legally accountable.