Crypto-economics
Crypto-economics is the study of how cryptocurrency can incentivize usage of a blockchain network. This page covers how Filecoin manages incentivization within the network.
Native currency
Filecoin’s native currency, FIL, is a utility token that incentivizes persistent storage on the Filecoin network. Storage providers earn FIL by offering reliable storage services or committing storage capacity to the network. With a maximum circulating supply of 2 billion FIL, no more than 2 billion Filecoin will ever exist.
As a utility token aligned with the network’s long-term growth, Filecoin issuance depends on the network’s provable utility and growth. Most of the Filecoin supply is only minted as the network achieves specific growth and utility milestones.
Filecoin uses a dual minting model for block reward distribution:
Baseline minting
Up to 770 million FIL tokens are minted based on network performance. Full release of these tokens would only occur if the Filecoin network reaches a yottabyte of storage capacity within 20 years, approximately 1,000 times the capacity of today’s cloud storage.
Simple minting
An additional 330 million FIL tokens are released on a 6-year half-life schedule, with 97% of these tokens projected to be released over about 30 years.
Additionally, 300 million FIL tokens are held in a mining reserve to incentivize future mining models.
Vesting
Mining rewards are subject to a vesting schedule to support long-term network alignment. For instance, 75% of block rewards earned by miners vest linearly over 180 days, while 25% are immediately accessible, improving miner cash flow and profitability. Further, FIL tokens are vested to Protocol Labs teams and the Filecoin Foundation over six years and to SAFT investors over three years, as outlined in the vesting schedule.
Collateral and slashing
To ensure network security and reliable storage, storage providers must lock FIL as pledge collateral during block reward mining. Pledge collateral is based on projected block rewards a miner could earn. Collateral and all earned rewards are subject to slashing if the storage fails to meet reliability standards throughout a sector’s lifecycle.
Total supply
FIL’s maximum circulating supply is capped at 2 billion FIL. However, this maximum will never be reached, as a portion of FIL is permanently removed from circulation through gas fees, penalties, and other mechanisms.
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