Key insight

Filecoin’s storage market continued to grow in 3Q23, with active transaction volume growing 45% sequentially and nearly 10x year-over-year. At the same time, as Filecoin’s storage capacity decreased by 10% sequentially, storage utilization increased from nearly 8% in Q2'23 to nearly 13% in Q3'23.

As of the end of 3Q23, nearly 1,900 customers had installed datasets on Filecoin. Of these, 422 customers had access to large data sets (storage size greater than 1,000 TiB), an increase of 25% quarter-on-quarter.

Storage fee agreement revenue declined 68% in FIL terms (73% in USD) in 3Q23, in line with the overall decline in demand-side revenue in the decentralized cloud storage space.

The Filecoin Virtual Machine (FVM) brings Ethereum-style smart contracts to support new use cases, including liquidity pledge, permanent storage, decentralized retrieval, and computing. Net deposits and borrowings continued to grow in the third quarter of 2013.

The deployment of Uniswap contracts on FVM could usher in a new phase of DeFi applications built on the Filecoin network.

Introduction to Filecoin

Relying on centralized data storage has a major disadvantage: it is difficult to systematically verify the integrity of the stored data. Filecoin Storage Network is a peer-to-peer version of Amazon S3. It is built on top of the Interplanetary File System (IPFS) as a distributed data storage and sharing layer for the Filecoin network. Filecoin regularly validates data stores and uses transactions that price storage based on supply and demand dynamics rather than a fixed pricing structure.

A storage transaction is like a contract with a service level agreement (SLA) — the user pays the storage provider to store data for a specified period of time. To keep data secure, Filecoin uses a crypto economic incentive model that periodically validates storage with zero-knowledge proofs. To incentivize storage providers to participate in the transaction, Filecoin rewards them with FIL (the network’s native token). Storage providers can also be penalized if they fail to provide reliable uptime or engage in malicious attacks on the network.

In order to retrieve data, the Filecoin user pays the retrieval provider to retrieve the data. Unlike stored transactions, which involve on-chain transactions, retrieval transactions use payment channels for off-chain settlement, which speeds up retrieval.

The Filecoin Virtual Machine (FVM) was launched in March 2023, bringing Ethereum-style smart contracts that support new use cases on Filecoin, including liquidity pledge, permanent storage, and decentralized computing.