In a global landscape boasting thousands of storage providers, Filecoin has rapidly grown to become the planet’s largest decentralized storage network. This pioneering network thrives in part, thanks to the practice known as “staking FIL” or “leasing FIL.” This approach empowers Filecoin Storage Providers, also known as SPs, by furnishing them with the essential FIL collateral necessary to sustain their operations on this expansive network. There will only ever be 2 Billion Filecoin or $FIL ever created, with burning of tokens reducing that supply by an estimated 40%. Please see the full tokenomics report by Messari here.
Powered by blockchain, Filecoin is designed for storing data in a decentralized form with cryptographic proofs serving to guarantee data immutability and security. With its help, users can earn passive income by renting out their unused storage to other network participants.
Another way of making profits with this blockchain platform is Filecoin staking. How does this process work? What are the most profitable options for users to stake FIL?
In this guide, we are going to cover these questions and provide a guide for Filecoin staking.
How Does Filecoin Staking Work?
Briefly speaking, there are two key ways to earn passive income with Filecoin: via Filecoin storage mining and via depositing FIL in various earning products.
Storage Mining
You may think of Filecoin as an AirBnb equivalent of digital storage. If you have some unused space on your laptop or a mobile device, you can rent it to someone else on the Filecoin platform and get paid in FIL coins for that.
In a nutshell, the process looks as follows.
- Clients who need storage place their orders on the storage marketplace.
- They specify the amount of storage they need and the price they are ready to pay.
- Once storage miners agree on these proposals, users transfer hashed data to them.
- Storage miners place this data on their disks and provide data owners with the private keys to their files.
- To ensure the security of files, storage providers deposit FIL coins. They lose this deposit if they cannot confirm the data storage.
- Also, for higher security, there are usually several storage providers who keep clients’ files.
- Users can retrieve their files on a Retrievable Market for free upon agreement with receiving miners.
The best way to learn how to become a storage miner is to join web3espa.io bootcamp.
If you simply want to earn interest on your Filecoin, there are various staking and earning products to choose from:
A. Centralized exchanges– Lowest returns, need to trust a third party, low skill level.
These are general investment products where users can deposit or “stake” Filecoin through a centralized exchange. Some of these products include the following:
- Binance Earn
- Kucoin Earn
- OKX Simple Earn
Each of these products implies purchasing Filecoin on the exchange and entrusting them to this exchange for the sake of attractive returns. Exchanges typically generate these returns by lending out the tokens you deposit and charging interest to borrowers. You may be able to choose a flexible savings account or a fixed-term investment product that requires locking up your FIL for a specified period of time.
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B. Joining a Filecoin staking pool – Higher returns in the range of 13-18%; must know how to use a meta mask wallet; no central control of your coins.
Filecoin staking in a pool is devoid of the counterparty risks inherent to centralized platforms since users can stake their coins in a non-custodial way. Yet, joining a staking pool is more complicated as it requires specific skills and knowledge.
First, staking Filecoin in a pool requires setting up your own wallet. It may be a popular browser wallet like Metamask or a hardware wallet such as Ledger.
Second, managing your funds in a non-custodial wallet implies various security measures since you are the only one responsible for the safety of your funds. While this is not a serious stop factor for tech-savvy users, it may still become an obstacle for those who prefer convenience over self-custody.
To view a full list of Filecoin Staking pools check out Filecointlrd.io
C. Become a storage provider at Filecoin – Very technical with large time commitment.
Another way to make money with Filecoin is to become a storage provider. You can become an integral part of the Filecoin system by registering as an SP and by providing your storage capacity to this decentralized storage network.
It requires technical skills and at least some basic experience running your own business. Check out our post on how to become a storage provider by joining Web3espa.io bootcamp.
Filecoin staking options compared
| Method | Requirements | Rewards | Risks |
| CEX | An account on a CEX | Staking rewards minus a fee | Entrusting your funds to a centralized platform |
| Staking pools | Personal wallet, some technical skills | Staking rewards minus a fee, liquidity tokens | Losing your private keys, entrusting your funds to a smart contract that may contain bugs |
| Storage provider | Hardware, software, technical skills | Storage payments, staking rewards minus a fee | Your FIL coins are at stake, penalties for going offline and for inability to ensure data integrity |
Fil tokens are the currency that power the Filecoin Network. There will only ever be 2 billion FIL ever created, so get started on your journey into the Filecoin ecosystem today.
Filecoin Staking – Useful Words to Know
- Proof of Work (PoW) – This is a popular consensus mechanism used in many cryptocurrencies like Bitcoin for validating transactions. Network participants, also known as miners, solve complex computational problems and add new blocks.
- Proof of Replication (PoRep) – This is an alternative consensus mechanism that Filecoin uses to secure its network. This procedure helps to validate that a Storage Provider has truly created and stored a unique piece of data.
- Proof of Spacetime (PoSt) – This procedure helps to validate that a Storage Provider continues to store the unique piece of data during the preset period of time.
- Storage Provider (SP) – This is a participant of the Filecoin network who opts to lend out excess storage space for other users to rent in a decentralized manner.
- Storage Market – This is the data entry point in the Filecoin network where SPs publish their storage deals on-chain and negotiate the conditions with their customers.
- Retrieval Market – The term refers to the process where SPs negotiate with their customers the conditions of data retrieval. In contrast to the Storage Market, negotiations on the Retrieval Market occur primarily off-chain.