Less than a week after the mainnet launch on October 15, Filecoin miners have turned their machines off complaining that the entry barrier is too high and the resultant economic model isn’t viable or incentivized enough for them to participate. This has prompted the project’s team to release 25% token rewards in advance, for miners providing processing power.
The Filecoin Network has passed epoch 148,888 🎉 — the rocket has lifted off 🚀 So far, the network is stable and community members are reporting successful operations #FilecoinLiftoff https://t.co/zxzc28D8ia— Filecoin (@Filecoin) October 15, 2020
The strike action came shortly after the five largest Filecoin miners refused to continue, citing reasons that the project is being run in an unfair manner and that they run a significant risk of losses by proceeding with it. Moreover, there were concerns even before the mainnet launch, which are now coming true. But what’s the issue at hand?
@filecoin has transitioned from calibration net to mainnet at block 148,888 after a 200M ICO and 3 years of dev.— Nico Deva (@NicoDeva_) October 18, 2020
Within 24h of launch a majority of miners are already on strike and talk about a failed wedding and forks.
Mining Requires Specialized Hardware And FIL Tokens
Filecoin requires a large number of FIL tokens to be locked in as collateral to begin mining operations. The only way miners can acquire tokens is through mining or purchasing. Currently, FIL token appears to be overvalued on exchanges and the token release schedule isn’t conducive to miners.
This means that the miners have to pay a premium price and make an investment, which isn’t likely to reach break-even anytime soon. The issue with mining to acquire tokens is the vesting schedule for six months, during which tokens are slowly released.
Filecoin Team Responds By Early Unlocking Of FIL Tokens
Fortunately, the team has stepped in and attempted to alleviate concerns through unlocking rewards earlier. They have also stated that there would be comprehensive discussions moving forward. In addition, there were fears that the project was going to be forked by miners.
The FIL004 Filecoin improvement proposal aims at changing the vesting for miners from 100% to 75%. You’d get (50/180*75% + 25%)*0.25-0.27 ~= 0.12 FIL/T/d.https://t.co/dPkNJbpGof— Nico Deva (@NicoDeva_) October 18, 2020
The proposal was accepted (20/n)
The miners who have invested large amounts of money in specialized and generally expensive hardware, can’t afford the project failing since the hardware isn’t much useful for anything else. A fork might have been the only option if the team didn’t respond.
The project’s leading market is China and Chinese miners have acquired equipment worth millions of dollars to provide data storage and computing power to run the Filecoin network.
Running a successful ICO in 2017, Filecoin is a highly ambitious and equally complex project in the cryptocurrency and blockchain arena. It is a decentralized file storage network built on top of InterPlanetary File System (IPFS), allowing the usage of idle storage for powering the dreams of a decentralized future – the Web 3.0. However, some concerns have been raised about the long-term viability of the project.