Filecoin can be an alternative to Amazon and its decentralized data storage business.

Filecoin was launched in 2020 to decentralize the data storage business, providing an alternative to industry giants like Amazon (AMZN) at nearly a thousandth of the cost.

At its core, the network connects storage providers with clients looking to stow their data. By offering storage space ranging from extra capacity on desktop computers to large racks and then running mathematical proofs to show that clients' data is unaltered, providers can earn the network's native FIL token as a blockchain reward.

Recently, activity has picked up the pace. According to a Messari report, active Filecoin storage deals between providers and clients surged 128% from the first quarter to the second quarter of 2022. Under Fil+, storage providers can earn 10 times the block reward, or amount of FIL tokens, of a typical deal by working with "trustworthy clients" such as universities and research facilities. These clients apply to notaries, or community-elected trustees, to verify the data they are storing. Fil+'s approval system weeds out storage providers who may negotiate deals with clients storing fake data just to reap block rewards. Analysts say that Fil+ block rewards act as a subsidy for providers, making it feasible for them to slash storage fees (averaging $0.0000026 per gigabyte per year). Still, they wonder what might happen to Filecoin's growth and activity once the incentive program tapers off.

"Over time, storage miners will have to start charging," said Messari enterprise research analyst Sami Kassab. "What I think is going to be the most important thing to watch there is if the storage demand can still keep up when storing data is no longer free." Filecoin project leaders say the network is set to roll out new functions to create additional revenue streams for data-storage providers, which would maintain growth and keep prices low even as the extra block rewards decrease. Jonathon Victor, product lead for Protocol Labs, the open-source research and development lab that developed Filecoin, outlined five revenue sources for storage providers: block rewards, storage fees, retrieval fees, transaction fees, and additional services.

Storage fees are what clients pay storage providers for the initial storage deal. Retrieval fees are what clients pay providers to fetch stored data. Transaction fees are what crypto brokers charge traders for buying and selling FIL. While revenue from block rewards will eventually decrease, Victor argues that storage fees will remain low as long as providers can make up the lost revenue through retrieval fees, transaction fees, and additional services.

According to Filecoin's 2022 roadmap, the storage network plans to add a retrieval market during the third quarter that would increase the speed of blockchain data retrieval and allow storage providers to charge clients for retrieving the data they are storing.

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