2024 was a pivotal year for Filecoin, with significant progress made in the Filecoin Virtual Machine (FVM), storage, retrieval, and computation. In this article, we will review the key milestones of 2024 and explore the main drivers of Filecoin's growth in 2025.
Source: Charting Success for Filecoin in 2024 (https://filecointldr.io/article/charting-success-for-filecoin-2024)
2024 in Review
In our earlier article "Charting Success for Filecoin in 2024" (https://filecointldr.io/article/charting-success-for-filecoin-2024), we outlined three key priorities for the Filecoin ecosystem in 2024:
Accelerating Paid Transactions: Driving paid services (storage, retrieval, computation) on Filecoin to create cash flow for service providers, helping to support more sustainable hardware financing beyond token incentives.
Driving On-Chain Activity Growth: Increasing on-chain activity through programmable services, DeFi, and new use cases.
Becoming Indispensable: Positioning Filecoin as an indispensable component for other projects and businesses.
These priorities are not mutually exclusive, but rather reinforce each other, indicating that the Filecoin ecosystem is becoming increasingly valuable. So, how did we perform on these priorities in 2024?
I. Accelerating Paid Transactions
Paid transactions are an ecosystem-level metric that reflects the volume of paid services on the Filecoin network. FilecoinTLDR is currently tracking this metric here (https://filecointldr.io/paid-deals-dashboard).
In 2024, Filecoin made significant progress in accelerating paid transactions by reducing frictions for enterprises to enter the ecosystem, primarily through the development of Proof of Data Possession (PDP) and the emergence of Layer2 solutions.
1. Enabling Efficient Hot Storage with PDP
Proof of Data Possession (PDP) is expected to launch in Q1 2025, introducing a new proof primitive to the Filecoin network, the first major proof development since Proof of Replication (PoRep) and Proof of Spacetime (PoSt). Unlike PoRep, which excels at cold storage through sealed sectors, PDP is designed for "hot data" - data that requires fast and frequent retrieval.
This new proof type can enable economically efficient "caching" storage on Filecoin without the need for sealing and unsealing, enabling fast data loading and retrieval. PDP opens the door for new storage providers focused on hot storage and fast retrieval, benefiting companies like Basin, Akave, and Storacha.
2. Scaling Filecoin through Layer2
In 2024, we saw an increase in Layer2 solutions built on top of Filecoin (see our earlier article "State of L2s on Filecoin") (https://filecointldr.io/article/state-of-l2s-on-filecoin). L2s like Basin, Akave, and Storacha can scale horizontally and vertically through secure, customizable subnets. These L2s strengthen Filecoin by unlocking new use cases: managing data-intensive workloads, supporting AI and unstructured data, powering gaming and privacy-focused applications, all of which create more opportunities for paid transactions.
II. Driving On-Chain Activity Growth
Filecoin has made significant progress in accelerating on-chain activity through the FVM, fueling the growth of the DeFi economy. The proposed Filecoin Network Services (FWS) and the launch of a Filecoin-backed stablecoin will further drive this momentum.
Source: Defillama (as of December 16, 2024) (https://defillama.com/chain/Filecoin?pool2=false&govtokens=false&doublecounted=false&liquidstaking=true&staking=true¤cy=FIL)
1. DeFi Milestones
As of December 16, 2024, over 4,700 unique contracts have been deployed on the FVM, facilitating over 3 million transactions. DeFi activity on the FVM (https://dashboard.starboard.ventures/fvm) has an average net deposit of over 30 million FIL (around $200 million), primarily driven by staking, liquidity staking, and DEXes, with GLIF accounting for 62%, followed by FilFi (10%) and SFT protocols (9%). The average net borrowing is 26 million FIL ($173 million), demonstrating the strong growth of the Filecoin DeFi ecosystem.
2. Filecoin Ecosystem's FIL-Backed Stablecoin
USDFC is a FIL-backed stablecoin launched by Secured Finance in Q4 2024, aimed at addressing key challenges in the Filecoin ecosystem. It brings stability to a network that previously lacked stablecoin options, reducing volatility and enhancing the store of value, similar to how DAI has done for Ethereum.
By allowing FIL holders and SPs to collateralize their assets with USD, USDFC can help pay for operational costs without selling FIL, preserving asset value and network support. It also boosts liquidity in the lending market by providing FIL-backed stablecoin liquidity, driving more efficient capital flows within the Filecoin ecosystem.
III. Becoming Indispensable
DePIN has risen to prominence, and Filecoin has solidified its position through key partnerships with AI and computing projects. Meanwhile, on-chain archiving has gained widespread recognition through partnerships with major on-ramps.
Solana co-founder Anatoly (https://x.com/aeyakovenko/status/1758737369220681895) stated: "Thank you Filecoin for creating an excellent decentralized archiving layer."
1. Notable On-Ramps in 2024
At this year's Solana Breakpoint (https://www.youtube.com/watch?v=gcmmQMkrqS4), Filecoin founder Juan Benet emphasized how Filecoin's zero-knowledge (ZK) storage can protect the entire Solana ledger.
Similarly, Cardano applications (https://fil.org/blog/blockfrost-and-filecoin-foundation-collaborate-to-enhance-the-decentralization-of-cardano-data) now have the opportunity to enhance data redundancy and decentralization through the integration with Filecoin via Blockfrost.
SingularityNET's (https://singularitynet.io/singularitynet-integrates-filecoin-decentralized-storage-using-lighthouse/) integration with Filecoin (through Lighthouse) highlights the growing demand for scalable and cost-effective storage in the AI-driven era, where efficient management of massive data is crucial.
These meaningful partnerships help demonstrate Filecoin's position as a key player in the realm of chain-based archiving and AI.
Source: Filecoin (X) (https://x.com/Filecoin/status/1831629192133218683)
2. Computing and AI Partnerships
This year, Filecoin has positioned itself as a key player in the evolving decentralized AI landscape. Projects like Ramo (network participation), Bagel (AI and cryptography research), Swan Chain (AI training and development), and Lilypad (distributed AI computing) have launched in the ecosystem, showcasing Filecoin's growing role in driving AI innovation (https://filecointldr.io/article/from-storage-to-intelligence-exploring-filecoins-role-in-the-ai-ecosystem).
Filecoin Challenges in 2024
While significant progress has been made, we have also noted some challenges facing the community. Although Web3 products are still in their early stages, forming a reliable centralized cloud alternative remains a massive challenge.
Product-Market Fit:
Barriers such as limited retrievability and high costs (driven by data replication) pose challenges to the efficiency of the Filecoin network.
Making transactions more convenient on the Filecoin network, such as through the use of stablecoins or flexible payment options, is necessary.
Improving the visibility of storage workflows and leveraging user data can help refine strategies and enhance performance in key areas.
Building a Sustainable Economic Model + Stronger Economic Cycles:
Viewing Filecoin as an island economy (https://youtu.be/kSE1gZVMXHk?feature=shared&t=479) highlights its focus on accumulating value through the export of goods and services, while minimizing outflows to retain as much value within the network as possible.
Source: Realizing the Filecoin Vision (Part 2) - Juan Benet (https://www.youtube.com/watch?v=kSE1gZVMXHk&t=479s)
The key challenge is to reduce outflows of external capital while finding ways to promote exports and capture more demand within the ecosystem.
Ensuring that transactions remain on-chain is also crucial for strengthening this economic model and creating a stronger economic cycle.
Filecoin 2025 Outlook
Looking ahead to 2025, Filecoin's development will continue. The following are three key themes that can drive the network's transformative growth while addressing the challenges mentioned in 2024.
Blockworks Research (https://x.com/blockworksres/status/1868725847894724964) states: "Filecoin is at an inflection point".
1. Accelerate Filecoin's Speed by 450x Through Fast Finality (F3)
Fast Finality (F3) is one of the most impactful upgrades to Filecoin's consensus layer since the mainnet launch. By significantly reducing transaction completion time, F3 overcomes a key limitation of the network's original consensus mechanism. This upgrade is planned to be launched on the mainnet in Q1 2025 (https://medium.com/@filoz/finality-unveiled-passive-testing-to-mainnet-launch-of-f3-fast-finality-03e09bc68de5).
Old vs. New:
Before F3, Filecoin's consensus mechanism ensured secure block validation, but required 7.5 hours (900 epochs) to complete a transaction, which was too slow for applications like smart contracts or cross-chain bridges.
With F3, transactions can be completed efficiently in minutes, a 450x improvement.
Significance for Filecoin:
Faster speeds and better user experience: Transactions completed in minutes, supporting low-latency applications and eliminating the previous long wait times.
Expanded use cases and accessibility: L2 subnets, such as Interplanetary Consensus (IPC), efficient smart contracts and decentralized applications, and blockchain bridges for interoperability with other chains.
Ultimately, this allows Filecoin to increase its usability across a wider range of applications.
2. Transcend Storage Through Filecoin Web Services (FWS)
Filecoin Web Services (FWS) (https://filecointldr.io/article/filecoin-web-services-the-future-of-decentralized-cloud-services/) is a key concept that has emerged this year, representing Filecoin's strategic shift to expand its scope from a primarily decentralized storage network to a broader blockchain-based cloud services market. This diversification can attract a wider range of users and use cases, potentially creating a more positive economic cycle within the network. Here's why FWS is worth watching:
Strengthening Filecoin's competitive edge: FWS will introduce features like programmatic SLAs (automatically enforcing service agreements through smart contracts to ensure clear performance expectations and penalties) and verifiable proofs (providing cryptographic evidence of service delivery, allowing users to independently verify service execution).
Expanding Filecoin's capabilities: By adding Proof of Data Possession (PDP), going beyond Proof of Replication (PoRep), it will enable powerful hot storage use cases. PDP will help improve data retrievability, a key factor in achieving product-market fit, which has been widely discussed in the Filecoin community this year.
Positioning Filecoin as a leading platform in the decentralized web: FWS will facilitate the integration of multiple networks and protocols, creating a cohesive marketplace for storage, computation, bandwidth, and other services, making Filecoin a key participant in the development of the decentralized web.
FWS is currently a developing concept, with new storage services featuring PDP (v0) currently under development. After this milestone, the FWS marketplace development will begin, expected to launch in Q1 2025.
3. Unlocking New Value Streams for Filecoin
As a Layer 1 blockchain, Filecoin's primary revenue generation has been through gas fee burning (when chain resources are used or faults occur). However, relying on gas fee burning as the main revenue source is not scalable and, more importantly, can increase operational cost and service costs.
A sustainable approach is to channel value back into the Filecoin economy through the utilization of the FWS marketplace, creating a more scalable and balanced revenue model. Proposed value capture mechanisms include:
FWS fees: Commissions (%) based on market transaction volumes.
Service fees: Charged when users consume services or when providers offer services.
SLA penalties: Imposed on service providers who fail to meet agreed performance standards.
This transition is expected to bring a more robust and diversified revenue stream, ensuring Filecoin's continued relevance and profitability in the evolving market.
Final Thoughts
As the value of data grows, we anticipate advancements in privacy-preserving machine learning, data-driven business models, and the increasingly important role of AI agents in unlocking the potential of decentralized storage.
Looking ahead to 2025, with the upcoming launch of Fast Finality (F3) on the mainnet and the continued development of Filecoin Web Services, Filecoin will play a core role in shaping the future of the decentralized ecosystem for data and AI. We hope to see these advancements allow Filecoin to transcend storage and unlock a sustainable economic model through the new revenue streams generated by FWS.
