Filecoin Filecoin Liftoff - the Main Event, 22 Oct 2020

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From YouTube: Filecoin Storage Economy

Description

Join Filecoin network engineer ZX as he discusses the mechanisms and models presented in the recent Engineering Filecoin's Economy report.

Join us for Filecoin Liftoff Week, an action-packed series of talks, workshops, and panels curated by the web3 community to celebrate the Filecoin mainnet launch and chart the network’s future.
https://liftoff.filecoin.io/

Events take place all week, October 19-23, 2020. #FilecoinLiftoff

For more information on Filecoin
- visit the project website: https://filecoin.io/
- or follow Filecoin on Twitter: https://twitter.com/Filecoin

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Chapters
00:00 Introduction
00:55 Filecoin Storage Economy kick-off
01:15 What's Cryptoeconomics?
04:50 A New Era of Mining
05:16 Island Economy
07:50 Bitcoin Comparison
09:40 Airbnb Comparison
11:25 Cryptoecon Challenges
12:17 Highlight–Block Reward
13:55 Highlight–Collateral & Penalty
14:45 Highlight–Storage Clients
16:00 Stages of the Economy

A

So hi everyone, um my name, is zx and I work on firecoin, crypto economics and today um welcome to falcon live up week today, I'm very excited to share with you about the storage economy of falcon and what mining falcon means, and how can you have the maximum impact in this economy?

A

To start? Let's just start from. Let's just start from what is crypto economics, so crypto economics is referring to is an emerging fear and study of designing economic games in a cryptographically enforced peer-to-peer network.

A

That's why you have the crypto and also economic, so the crypto apart is basically setting like um rules and like a setting like so-called invariants and or physics inside the system, and they con and the economic part is basically steering the system towards the direction that the system wants to go like an analogy that we often make with falcon as a software rocket. The crypto economic is basically steering where the rocket is heading.

A

Next, I'm using a diagram from a paper with a collaborator at block signs. So it's really is. It really is an interdisciplinary field, with with the computer science cryptography in the underlying layer of like how the ledger get updated and how.

A

Engineering science, economics and game theory, where, um where a lot of flaws being put in from this discipline, to understand how do we build this economic layer on top of the blockchain layer such that the system collectively can achieve a goal?

A

Well, if the system has no goal or is a very simple goal like this, job could be pretty simple, but like the moment when you have different stakeholder groups- and you have long short, research and complexity of this decision phase just below very quickly and as once, we develop the blockchain layer and economic layer, there's also aspects of ethics, philosophy and political science and governance that sit um that sit on top of these layers as well.

A

But it really is an interesting field and I'm very excited to share more of our work with you guys today and another another lens to look at.

A

This could be like uh we have the crypto network, which is the software layer uh where consensus is reached and so on, and we have agents basically making decisions and taking actions given given the action space that the protocol allows them to take um based on their private information and their observation and the observation of the system, states and then there's also um algorithmic policies which is designed and agreed upon by the community.

A

That would that would uh they will perform state update based on this network state and steer and see the network in towards a certain direction and, as this iteration evolves over time, like human agents will participate in the governance and through the governance, it will basically update both the policy and also update how the underlying underlying software layer will work.

A

And so in p, and so a very distinct thing about falcon. Is it's a it's a blockchain network of useful work so to do it and there's also a common mission and goal where that brings all these participants together to um to try to make this mission a reality, and the mission is to create a decentralized, efficient and robust foundation for humanities information and on the crypto economic side? How can do we make that mission? Come a rational choice and be incentive aligned for all the participants in the network, and this mission will take time.

A

It will not be it will not be achieved within a day or if, in a few months you may take many years to come and how do we create this sustainable, sustainable incentive and all these economic structure such that it's in the interest of all narrow participants to try to achieve this goal.

A

And um and today's mind day, I think I'm very excited to I think we are on set at the onset of something much greater. I think we are ushering in this new era of mining, where blockchain is made useful blockchain can empower businesses and all the participants can evolve together with the network, and I will explain more in detail.

A

So, first of all, let's just like give an overview of what are the stakeholder groups within the file client economy. So if we have the storage clients which will be storing.

A

And then we have storage manners who are providing miners which include, storage, monitor retrieval and providers. Other kinds of mining and miners are providing storage um services on the falcon network, while also maintaining the underlying blockchain layer of consensus.

A

And then we have developer building products and experiences on the falcon network to make storage related goods and services more attractive to the storage clients together developers and miners working together try to bring more clients into the network, and then we also have token holders who provide liquidity and capital investments for miners and developers and also for clients and then there's also ecosystem.

A

There are also ecosystem partners like the falcon foundation, consensus block signs, protocol labs and many many others who are who are basically helping to grow and expand the ecosystem analogy that I would like to use and is it's an island economy. This is where all these stakeholder groups come together to work towards a common goal and falcon is basically like the native native currency to this island.

A

So researchers develop algorithms and make it more efficient and make the network more robust developers improve the user experience through products on the platform and token holders provide liquidity and capital and capital for collateral, and so on and miners will match all these resources and try and turn them into search little goods and services in collaboration with all the other stakeholders, and then clients can exchange um these goods and services with firepoint and and the goal of the economy should be trying to turn.

A

Try to turn this production cycle from storage, raw storage, materials into storage, related goods and services as efficient as productive as possible and the more attractive more competitive are these storage goods and services. There will be more potential, clients and participants want to join the economy and want to become one to be want to be want to be uh want to do trades with the island and the more attractive. This is the greater the demand of like storage, goods and services on file coin.

A

The greater the demand uh would be for the native currency, which people would need to perform any exchanges with with the participant in the network, and so the overall goal for.

A

All more efficient in converting raw materials into structured goods and services and how to make it more attractive such that we can attract, attract more potential clients and participants, and I mentioned just now: it's an is we're ushering in a new era of mining. I think it's and many of us came from like a very a bitcoin mining kind of um world, where both bitcoin and falcon are decentralized, blockchain networks, but I think there are quite a few differences in terms of mining.

A

So, first of all, I think in bitcoin we might people might specialize hardware where falcon mining is on general purpose. Hardware with high result value. um Some of these differences in the third time and velocity will need to dissolve in the design and because of falcon mining require only require general purpose. Hardware with high result, value um just hardware itself alone may not be enough to provide enough security to the network, and that's why we may have some that's why we have some collateral requirements, particular money.

A

Most of that is racial work and whereas for falcon mining we want the work is useful to somebody and because it's because um for the whole bitcoin mining, um because it's it's very hard to reason about the valuation basis of the network. So a lot of the value is speculation. Driven where folklore mining is utility driven. The network utility um is something that's observable that can be approximated and observed, and because of that, bitcoin money may tend to be a bit more short term.

A

Where minor, mind tokens, and then they can uh they most of time. They will just sell it versus in falcon mining miners incentivize explicitly to be long term and and reinvest into a network, and because of some of that, like sometimes bitcoin money can be a bit more expensive and zero sum versus uh and falcon because we're building an economy. It's it's greater, it's bigger than um just just agreeing on a ledger. It requires us to collaborate.

A

It requires to develop a winning situation for all stakeholders in the network, and while we compare that with bitcoin, I think it's useful to also compare falcon mining uh or operating firepoint um storage with um being an airbnb host. Both falcon airbnb are similar in the sense that these are.

A

These are both global platform economies, but there are also some differences as well, so like in airbnb um hosts, contribute housing resources, whereas on flower point we, um the miner or storage operator, contributes storage resources and airbnb mining is um labor in once, of course, when you get a house, but after that it becomes very labor intensive, whereas on falcon mining is more uh knowledge. It's more knowledge and experience.

A

Intensive and an airbnb host is a contractor to the network, whereas in falcon mining, when you're a miner, you are an owner to the network and there's a big difference.

A

um Sorry, there's some question um and what's this airbnb host hosting airbnb is managed by the company, whereas mining on falcon is governed by a decentralized ecosystem, but there are also some similarities as well like both airbnb and um hosting and falcon mining share the same branding a burnt identity, and this is very important um for um especially for falcon because, like in in terms of the spirit, airbnb there's always this legal recourse. But what we can rely on in a decentralized network is actually the crypto economic mechanism um on filecoin and both hosts.

A

Both airbnb hosts and falcon miners are incentivized to create differentiated services, to attract a diversity of client and diversity of and to satisfy diversity of needs.

A

With that, I think I would introduce.

A

Emission of the network- and this is done through rewarding, reliable and useful storage, and we also need to assume, as you saw earlier, there are like five different stakeholder groups in falcon, so you need to balance the short, medium and long-term interest of all stakeholder groups present and future and the utility of the network, and the hope is that the goal is that falcon mining is profitable in the long run, with little or no subsidy, and that's how we can create a sustainable economy.

A

So, um to briefly explain some of the construction and mechanism within falcon. I would. I would just highlight a few key areas on on a higher level and some of the innovation that and some of the thought and innovation that we did there.

A

So, first of all, on block reward. um We introduced a concept called a hybrid minting, so in most traditional proof of work, mining people follow a simple exponential decay minting model, but that mental model has a couple of problems, one of which, which the dominant one is that it creates a very short.

A

Participants to over invest in early days of network when the network is at when an hour is least mature and participation is at its lowest and um and that breaks and that base what that means is that the net, the token the meaning of the network, the token making of the network is not proportional to the utility of the network and therefore on file point we create this notion called baseline and we introduce a concept called baseline, linking whereby we define network time as the we define sorry, we define a notion of baseline, which is a kpi that the network needs to achieve, and then we define notion of network time as a match as a measure of the network's progress in achieving that kpi and the net result here is that compared to a simple exponential decay model, where the input to the reward is just times because and it's exponentially decaying, which it tells us pretty rapidly their incentive structure now, is rewarding more proportionally to the storage and utility that the miner provides than simply just time.

A

However, we also we do the hybrid model, which is we do both implementing and baseline minting. The the portion of simple meeting is to provide counter counter forces to shocks in the event that it happens.

A

And the next part here is on collateral and penalty. So, as I mentioned earlier, the key thing here is: the incentive should go to reliable and useful storage so initial. So when a miner onboard sector to the network, they need to put up some initial pledge collateral and that provides storage, security and consensus security to the network, and this is set based on how much a sector is expected to earn in valcoin, so that that will basically make the reasoning about whether onboarding a sector is rational.

A

A lot easier and the initial pledge is returned when the sector promises.

A

To incentivize, reliable, reliable storage and some slackness in the penalty was also introduced in as part of the falcon improvement protocol to reduce um to reduce the risk of penalty for reliable storage and the third step is uh we put power back into the storage clients? So I think you may have heard um people might have heard this concept called verified clients or we are. We might be calling that filecoin plus clients. There will be a talk on it.

A

I think, on um during store day, so basically, sectors containing uh verify, client, falcon, plus client's deals will earn 10 times the storage power and hence 10 times the reward. This is putting power back in the hands of storage, clients and storage, clients and storage.

A

Clients can now become active participants of the network to shape storage, product and services on falcon, and the net result is that falcon is made more useful, more decentralized than a purely resource-driven network, and decentralization can happen over many different axes, including like token production, geographic, distribution and um and just and and we balance the power of different stakeholders within within the falcon network.

A

So these are the these are the three highlights of um crypto economic structure that we introduced in filecoin that would um make that will make firepoint more useful and more decentralized as a network of useful work.

A

And, lastly, I want to just highlight the different stages of the economy, so we talked about just now for the reward structure, um it's more tied towards the utility of the network through baseline right, like us, the network progress us now progress and achieve and unlock and and achieve a higher kpi level in in terms of baseline. We unlock weather rewards through baseline minting, so right now we're just at stage one where the incense, the source of revenue mostly come from simple exponential decay.

A

uh There are some coming from baseline, maintain but because baseline is, is set in such a way that, like it, takes time to go up to the baseline. So right now the baseline meeting is slightly muffled. We have some basic quality of service requirements that is enforced by the collateral and penalty structure and we're building capacity. There are lots of products and lots of applications being developed right now.

A

The proof is secure and they're very secure, and there is some basic level of retrieval and as we pro as- and this gives the community time to develop and evolve the economy and- and we may enter stage two where the chain is made a lot more scalable operational cost of mining becomes lower as time goes on, hardware becomes, cheaper, algorithm becomes, more performant, proof becomes more efficient, retrieval also becomes more efficient and, as time goes on, simple minting will start to decay, and this is where- and this is also when the network can achieve a greater level of the baseline, which is a function of like how much space time has been committed on the network and the baseline meeting will pick up and the token matching increase in the network utility.

A

Has improved, we start to see some like client paying and we start to see. We start to see clients paying uh for storage deals, and then we enter stage three. We now have strong brand replication of food spill, product, diverse market cdn, low, retrieval and uh simple, maintain by this time. It's like coming down, and then we still have some baseline meeting.

A

But the quality of service on falcon is so great that miners are willing that clients are willing to pay for the storage deals and that's when we we said earlier that the reason is that money on falcon becomes profitable in the long run, with little or no subsidy and I'm very excited. This is just the beginning, and um I think for the next couple of days we're going to talk more about like what to be built on follow coin.

A

What and what to store on powerpoint- and I think we are- we are at this very exciting moment of the industry- and I think, like let's go out together to make blockchain useful to make web3 mainstream and together we'll make some history.