Filecoin 2024 Review and 2025 Outlook

2024 is a pivotal year for Filecoin, with significant progress in the Filecoin Virtual Machine (FVM), storage, retrieval, and computation. In this post, we’ll review the key milestones of 2024 and examine the main growth drivers for Filecoin’s development in 2025.

Source: Filecoin’s Road to Success in 2024 (https://filecointldr.io/article/charting-success-for-filecoin-2024)

2024 Review

In our earlier article “Filecoin’s Road to Success in 2024” (https://filecointldr.io/article/charting-success-for-filecoin-2024), we listed three key priorities for the ecosystem in 2024:

• Accelerate paid transactions:Promote Filecoin

• Promote on-chain activity growth:Increase on-chain activity through programmable services, DeFi, and new use cases.

• Become indispensable:Make Filecoin an indispensable component of other projects and businesses.

These priorities are not mutually exclusive, they overlap, indicating that the Filecoin ecosystem is becoming increasingly valuable

Value. So, how are we doing on these priorities in 2024?

1. Accelerate paid transactions

Paid transactions are an ecosystem-level metric that reflects the number of paid services in 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 the friction for enterprises to enter the ecosystem, mainly including the development of Proof of Data Ownership (PDP) and the emergence of Layer2 solutions.

1. Use PDP to achieve efficient hot storage

• Proof of Data Ownership (PDP) is expected to be launched in the first quarter of 2025, introducing a new proof primitive for the Filecoin network, which is the first major proof development since Proof of Replication (PoRep) and Proof of Space and Time (PoSt). Unlike PoRep, which excels at cold storage by encapsulating sectors, PDP is designed for "hot data", that is, data that needs to be retrieved quickly and frequently.

• This new type of proof enables cost-effective “cache” storage on Filecoin without sealing and unsealing, enabling fast data loading and retrieval. PDP opens the door to new storage providers that focus 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 Filecoin (see our previous article "The State of Layer2 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: including managing data-intensive workloads, supporting AI and unstructured data, supporting games and privacy-focused applications, all of which create more opportunities for paid transactions.

Second, promote the growth of on-chain activities

Filecoin has made significant progress in accelerating on-chain activities through FVM, which has stimulated the growth of the DeFi economy. The proposed launch of Filecoin Network Services (FWS) and Filecoin-backed stablecoins will further promote 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, more than 4,700 independent contracts have been deployed on FVM (https://dashboard.starboard.ventures/fvm), facilitating more than 3 million transactions. DeFi activities on FVM (https://fvm.starboard.ventures/explorer/leaderboard) have an average net deposit of more than 30 million FIL (about $200 million), mainly driven by seed pledge, liquidity pledge and DEX, of which GLIF accounts for 62%, followed by FilFi (10%) and SFT Protocol (9%). Net borrowing averages 26 million FIL (US$173 million), demonstrating the strong growth of the Filecoin DeFi ecosystem.

2. FIL-collateralized stablecoins for the Filecoin ecosystem

• USDFC is a FIL-backed stablecoin launched by Secured Finance in the fourth quarter of 2024 to address key challenges in the Filecoin ecosystem. It brings stability to networks that previously lacked stablecoin options, reduces volatility and enhances value storage, similar to what DAI does for Ethereum.

• By allowing FIL holders and SPs to pledge their assets with USD, USDFC can help pay operating costs without selling FIL, thereby preserving asset value and network support. It also improves liquidity in the lending market by providing FIL-backed stablecoin liquidity, thereby driving more efficient capital flows within the Filecoin ecosystem.

Third, become indispensable

DePIN has risen to fame, and Filecoin has consolidated its position by establishing important partnerships with artificial intelligence and computing projects. At the same time, on-chain archiving has gained wide recognition through partnerships with major on-ramp partnerships.

Solana co-founder Anatoly (https://x.com/aeyakovenko/status/1758737369220681895) said: "Thanks Filecoin for creating an excellent decentralized archiving layer."

1. On-Ramp worth paying attention to 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 protects the entire Solana ledger.

• Similarly, Cardano applications now have the opportunity to enhance data redundancy and decentralization through Blockfrost’s integration with Filecoin.

• SingularityNET’s integration with Filecoin (via Lighthouse) highlights the growing need for scalable and cost-effective storage in the AI-driven era, where efficiently managing massive amounts of data is critical.

• These meaningful partnerships help showcase Filecoin as a key player in the on-chain archive and AI space.

Source: Filecoin (X) (https://x.com/Filecoin/status/1831629192133218683)

2. Computing and AI Partnerships

• This year, Filecoin positioned itself as a key player in the growing decentralized artificial intelligence field. Projects such as Ramo (network participation), Bagel (AI and cryptography research), Swan Chain (AI training and development), and Lilypad (AI distributed computing) were released in the ecosystem, highlighting Filecoin's expanding 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 great progress has been made, we also noticed some challenges facing the community. Although Web3 products are still in their early stages, forming a reliable centralized cloud alternative is a huge challenge.

Product-Market Fit:

• Barriers such as limited retrievability and high costs (driven by data replication) challenge the efficiency of the Filecoin network.

• Payments need to be made more convenient by transacting directly on the Filecoin network, such as using stablecoins or flexible payment options.

• Increasing visibility into storage processes and leveraging user data can help refine strategies and improve performance in key areas.

Building a sustainable economic model + stronger economic cycle:

Thinking of Filecoin as an island economy (https://youtu.be/kSE1gZVMXHk?feature=shared&t=479) highlights its focus on accumulating value by exporting goods and services, while keeping as much value as possible within the network by minimizing outflows.

Source: Realizing the Filecoin Vision (Part 2) - Juan Benet (https://www.youtube.com/watch?v=kSE1gZVMXHk&t=479s)

• The key challenge is to reduce external capital outflows while finding ways to promote exports and capture more demand within the ecosystem.

• Ensuring that transactions remain on-chain is also critical to strengthening this economic model and creating a stronger economic cycle.

Filecoin 2025 Outlook

Looking ahead to 2025, Filecoin's development continues. Here are three key themes that can drive the network’s transformation while addressing the aforementioned 2024 challenges.

Blockworks Research (https://x.com/blockworksres/status/1868725847894724964)

said: “Filecoin is at an inflection point.”

1. Speeding up Filecoin 450x with Fast Finality (F3)

Fast Finality (F3) is one of the most impactful upgrades to the Filecoin consensus layer since the launch of the mainnet. By significantly reducing the time it takes for transactions to be completed, F3 overcomes a key limitation of the network’s original consensus mechanism. This upgrade is scheduled to be launched on the mainnet in the first quarter of 2025 (https://medium.com/@filoz/finality-unveiled-passive-testing-to-mainnet-launch-of-f3-fast-finality-03e09bc68de5).

New and old comparison:

• Before F3, Filecoin's consensus mechanism ensured secure block verification, but it took 7.5 hours (900 epochs) to complete transactions, which was too slow for applications such as smart contracts or cross-chain bridging.

• With F3, transactions can be completed efficiently in a few minutes, an increase of 450 times.

What it means to Filecoin:

• Faster speed and better user experience:Transactions are completed in minutes, supporting low-latency applications, eliminating the previous long waits.

• 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 enables Filecoin to increase its usability in a wider range of applications.

Second, Beyond Storage with FWS

Filecoin Web Services (FWS) (https://filecointldr.io/article/filecoin-web-services-the-future-of-decentralized-cloud-services/) is a key concept that emerged this year and represents a strategic shift for Filecoin, expanding its scope from the main decentralized storage network to a broader blockchain-based cloud service market. This diversification can attract a wider range of users and use cases, potentially creating a more positive economic cycle within the network. Here are the reasons why FWS is worth paying attention to:

• Strengthening Filecoin's competitive advantage:FWS will introduce features such as programmatic SLA (automatically executing service agreements through smart contracts, ensuring clear performance expectations and penalties) and verifiable proofs (providing cryptographic evidence of service delivery, allowing users to independently verify service execution).

• Expanding Filecoin’s functionality:Going beyond Proof of Replication (PoRep) by adding Proof of Data Ownership (PDP) enables a powerful use case for hot storage. PDP will help improve data retrievability, a key factor in achieving product-market fit that has been widely discussed in the Filecoin community this year.

• Positioning Filecoin as the leading platform in the decentralized web:FWS will facilitate the integration of multiple networks and protocols to create a cohesive marketplace for storage, compute, bandwidth, and other services, which will make Filecoin a key player in the evolution of the decentralized web.

FWS is currently a concept in development, with new storage services featuring PDP (v0) currently under development. Following this milestone, development of the FWS marketplace will begin, with an expected launch in Q1 2025.

3. Unlocking new value streams for Filecoin

As a Layer 1 blockchain, Filecoin generates revenue primarily through gas fee burning (occurring when chain resources are used or failures occur). However, relying on gas fee burning as the main source of revenue is not scalable, and more importantly, it will increase operating expenses and service costs.

A sustainable approach is to return value to the Filecoin economy by using the services of the FWS market, thereby forming a more scalable and balanced revenue model. The proposed value accumulation mechanisms include:

• FWS Fee:A commission (%) is charged based on market transaction volume.

• Service Fee:Charged when users use services or suppliers provide services.

• SLA Penalties: Penalties imposed on service providers who fail to meet agreed performance standards

This shift is expected to result in more robust and diversified revenue streams, ensuring Filecoin’s continued relevance and profitability in an evolving market.

Final Thoughts

As the value of data grows, we expect advances in privacy-preserving machine learning, data-driven business models, and AI agents to play an increasingly important role in unlocking the potential of decentralized storage.

Looking ahead to 2025, with the upcoming launch of Fast Finality (F3) on mainnet and the continued development of Filecoin network services, Filecoin will play a central role in shaping the future of data and AI in the decentralized ecosystem. We hope to see these advances position Filecoin beyond storage and unlock sustainable economic models through new revenue streams generated by FWS.