- Filecoin has denied reports of miner unrest, which surfaced after the token’s launch.
- Miners have complained about the token's economic model, which they say does not sufficiently incentivize them to mine the cryptocurrency.
- Filecoin hit back against the claims and offered new loan programs to help miners needing support.
Decentralized storage network Filecoin launched last week, amid much excitement. But less than 24 hours later, reports surfaced of miner unrest, and Filecoin’s token, FIL, has since plummeted 25%.
The much-anticipated project presents an alternative to centralized storage providers such as AWS. But Chinese crypto site 8btc has claimed that five of the largest mining pools have thrown in the towel since Filecoin launched on Thursday, and there’s talk of them potentially forking the network. Critics claim that the project’s economic model provides little incentive to mine the cryptocurrency.
Filecoin pushes back
Filecoin founder Juan Benet today strenuously pushed back against the reports.
The company said that they know of no big miners that have exited its blockchain. “We’re confident that miners are very favorably incentivized to participate in the network,” Ian Darrow, Head of Operations at Filecoin told Decrypt. “We don’t know of any miners who have gone offline.”
The company also issued a detailed report early today attempting to rebut criticism and offered new loan programs to help any miners that need support. Protocol Labs, which oversees Filecoin, “is working with a partner (TBA) to provide small loans to miners from now until broader loan markets take off. More on this during the week,” Benet tweeted today.
Disputing reports that miners are quitting the network, Darrow said that miners are still providing storage capacity, with an additional 2 pebibytes (PiB) added in the past three hours alone. (One pebibyte is equivalent to approximately a million gigabytes.) “Not one large miner has said they are going to stop mining,” he said.
“In fact, the network continues to grow rapidly, and just crossed 600 PiB today,” Darrow said. “Some miners who have been working on the project for months or years before launch are indeed choosing to sell FIL they mine instead of reinvesting it. We don’t know what sorts of financial obligations these miners might have—they may have taken out loans that are due, or be getting pressured by investors to pay dividends. Ultimately, we totally respect miners’ choices on how they manage their cash flow.”
However, 8btc.com quoted Lai Chuhang, who is prominent in China’s Filecoin community, and chairs technology startup Space Cloud, as saying that miners were “helpless.” No one has money to continue, he claimed.
Filecoin's tokenomics criticized
Filecoin’s economic model means that successful miners are rewarded with tokens each day for 180 days, however, the miners must provide FIL as collateral, ensuring that their commitment is honored. Filecoin has created a lockup that mandates investors to hold onto FIL for at least six months after the mainnet launch
An anonymous Twitter user, Nico Deva, posted a long thread with detailed criticism of the model on Sunday.
“Here in China people are disgusted, 恶心 (nausea), this is the word repeated,” he tweeted. “A napkin calculation shows you early on that your mining system that requires $20k hardware also forces you to buy more coins. In a country where ponzinomics is an art, the 2017 poster boy just [blew] it.”
In his tweetstorm today, Benet pointed out that it has tried for weeks to get ahead of miners’ concerns by making 25% of token rewards available for withdrawal immediately after a block is successfully created.
“Following launch, we saw some miners choose to sell some Filecoin, and this is totally understandable; miners have been working with no cash flow for years and it’s not surprising that they want to de-risk slightly before continuing,” said Darrow.
But he added that few miners were selling all the FIL they’ve generated, and most are reinvesting. “The net result of which is the continued growth of the network,” he said.
“Overall, we’re very happy with what we consider to be a very successful launch,” said Darrow. “The transition to mainnet has been super smooth and the software works very well—which is by far the most important thing. Of course, we’ve seen some craziness, but no more than we anticipated given all the excitement around Filecoin, and things are leveling out.”
But despite the team’s best efforts, the price of its token has continued to fall. Trading opened on Thursday at $26 and peaked at $63 before the token fell to $31, with market capitalization falling from $952 million, at peak, to $539 million.
And there are concerns that Filecoin’s tokenomics may require further work.
The project today begins its “Filecoin Liftoff” event, which aims to chart the network’s future. Its investors will be all ears.