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Filecoin / Filecoin Liftoff - the Main Event / 21 Oct 2020
Filecoin / Filecoin Liftoff - the Main Event / 21 Oct 2020
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From YouTube: The Decentralized Cloud is Here with Olaf Carlson-Wee

Description

The decentralized cloud is here. What does that mean for the world? How will this affect how we build apps and store our data? Polychain founder and CEO Olaf Carlson-Wee explains what prompted him to invest early in Filecoin and why he's excited about the future of decentralized file storage.

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.

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

Get Filecoin community news and announcements in your inbox, monthly: http://eepurl.com/gbfn1n

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Happy to witness, alongside all of you.

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The launch of the filecoin mainnet in this last week.

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And I'm just very eager and excited to see what happens.

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Now that we have the largest scale, distributed file storage network, that's ever existed.

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So I want to talk a little bit about starting from an investment perspective,.

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What I find so interesting about filecoin.

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And how the filecoin value sort of relates,, I think very neatly to the size and scale of the storage network being bootstrapped using ipfs and filecoin.

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So, sort of as a bit of background,, I think it's important to understand how every cryptocurrency system has always had a sort of work. System.

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And this was pioneered with bitcoin's proof of work, and now has been iterated upon by systems like proof of stake,, proof of storage and everything..

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Most of these work systems historically have been intentionally wasteful, right?.

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So bitcoin hashing is sort of intentionally only useful.

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In order to find consensus in the bitcoin network.

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There's not this sort of other usefulness of that hash. Rate.

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And one of the reasons is for security,.

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It's really for security reason..

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If bitcoin work was really useful for something else,.

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It could make it potentially cheaper to 51% attack the system,, because you could sort of use that work for some other economic benefit and just sort of attack bitcoin as a side. Project,.

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So to speak., if that attack failed,, you wouldn't have sort of lost all of your investment..

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So it's historically been very hard to create a sort of proof of work style system.

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That has usefulness outside of network consensus.

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Filecoin is one of their really first attempts to create what I would call a useful work system, whereby the actual sort of network consensus layer.

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And all of the work that goes into that actually creates a sort of beneficial output.

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So one of the most exciting graphs, I think, in all cryptocurrencies,, more so than any sort of price charts or anything is really the hash rate in bitcoin.

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And the hash rate in bitcoin has been this sort of incredible exponential, expansion,.

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Since the inception of the bitcoin network., it doesn't really matter where you look at that chart, back in 2013,, 2015,, 2017,, 2019,.

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It always looks like an exponential curve up into the right.

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And you really have to put the hash rate on a logarithmic scale to have any sort of meaningful view of how that work has expanded over time.

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So it's sort of this very reliable way to build work.

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Is to create a cryptocurrency that has value, bootstrap that value, and then you're going to see this massive network of miners sort of emerge. Naturally,.

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In order to contribute work to that system in order to earn block, rewards and other sort of fees that might accrue in that network.

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And so one of filecoins, big breakthroughs outside of just the distributed storage system- that's represented by ipfs, is the tying of this economic work function.

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To this distributed file, storage, network., and what that means is that we can expect to see,.

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This sort of exponential growth.

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In the work contributed to the filecoin system,.

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But, rather than just creating network consensus, the way it does with, for example, bitcoin,, this actually also bootstraps.

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This massive distributed file, storage, system,, because the more miners add storage capacity.

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To the filecoin network,, the cheaper and cheaper file storage becomes for those that want to use it, and that just the more availability there is for that entire filecoin system.

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and so by bootstrapping. A valuable cryptocurrency,.

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We kind of also bootstrap this massive distributed: storage, network.

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And so,, I think this is one of the big economic breakthroughs of the filecoin system.

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So the other thing that's interesting about that.

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Is when you're thinking about trying to determine the value of a cryptocurrency or some sort of reasonable system for sort of how to value a cryptocurrency,?

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I think historically, that's been empirically quite difficult.. So if you look at, for example, bitcoin,.

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Bitcoin is a very speculative asset.

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It's an extremely alternative sort of store of value.

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And all of these things., so it's quite useful much in the way the non sovereign stores devalue or are useful outside of fiat money..

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So things like gold, right?, but it's quite difficult to try to find some sort of fair value or a floor value for what something like bitcoin should be valued. At.

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In the filecoin system,, because filecoins are actually contributed as stake.

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For all of this massive distributed network of storage providers, as the filecoin price goes up,, you can actually expect more and more and more,.

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Sort of file storage capacity to come onto the filecoin network,, because those miners are being rewarded with block rewards.

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and the value of those block. Rewards, denominated in fiat money, goes up as the price of filecoin goes: up,, meaning they're going to contribute more and more storage capacity to the network..

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So what that means is that there's like a real demand driver for filecoin.

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Because of this distributed for storage network., so as a demand for storage in the filecoin network, grows,.

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You actually are going to see the service providers need to go out and acquire filecoin and stake it in order to actually capacity to the network.

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So, unlike systems like for example,, bitcoin and ethereum,,.

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Where there is a lot of potential value in those assets,.

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But it's very hard to reason about where that demand comes from outside of this sort of sovereign money. System,.

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That's outside the scope of any sort of nation, state or anything like that.. You really have this distributed storage network driving a huge amount of demand for filecoins.

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So that miners can add storage capacity to network.

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And unlike, for example, ethereum, where, when you interact with a smart contract, yes, that creates demand for ether in order to pay for gas,.

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But that ether is very rapidly delivered to miners who are selling to cover costs in that system..

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So it's very short term demand in these sort of gas or transaction fee type. Systems,.

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Whereas in filecoin, because those filecoins must be permanently staked in order for those operators to put up risk so that if they are dishonest or they can't service file, retrieval request.

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Or anything like that,, they can be slashed., and so because of that sort of useful work system.

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As well as the economic model of filecoin, you see this organic sort of demand for the filecoin asset as demand for the distributed storage network grows.

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And so I think that this creates in a way a sort of floor value for reasoning about the value of filecoin, unlike, for example, bitcoin, hash rate..

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Just because a huge amount of infrastructure investment.

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Has gone into bitcoin mining, in my mind that doesn't really create any sort of floor value for the demand of bitcoin, right?.

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So if the bitcoin price is not sort of bullied.

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Or held up by the miners in the bitcoin network,.

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Whereas in the filecoin system,, I think the value of filecoin to an extent is,.

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Because the service providers need to stake filecoins in order to provide storage capacity network..

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So there's a lot of experimentation there going on with the economic model for filecoin,, and I do think it may have to be iterated upon over the course of the next several years in order to optimize it for the growth of the capacity of the filecoin network..

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But I'm very excited at the possibility that we could see over the next 10 years,, just like we have in the last 10 years with bitcoin, this sort of graph. That looks a little bit like.

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The bitcoin hash rate graph for filecoin storage, capacity.

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And that we kind of may have finally created a crypto economic system that sort of outputs this useful work system.

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Where it's not just burned hash cycles or staking which, is just about network consensus..

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So now that we've sort of have this economic model.

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And this distributed file storage system based on ipfs,.

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And content-based addressing,: what are we going to be able to use this for??

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So there's a couple of ways I like to think about this..

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The first is a possible sort of cost savings.

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For certain types of storage., so for the first time we have a global liquid order book for file, storage, right?.

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You could almost view existing file storage as as big sort of otc markets, so to speak,.

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Where you basically have bilateral agreements.

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Between businesses or individuals and systems like amazon, web services,, microsoft, azure,, google cloud, and it's kind of this big otc system,.

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With just a few massive providers.

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in filecoin,, you sort of have this one global liquid order, book., and so I do think that as people purchase, the filecoin asset.

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And sort of hold that asset,, it creates value for the block rewards in the filecoin system, and that means service providers that are contributing file, storage capacity to the network, get paid in those block rewards..

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So as you sort of bootstrap a valuable cryptocurrency network in the case of filecoin,, I do think it's possible for certain types of storage for filecoin to actually offer cheaper storage than is available in these bilateral agreements with major cloud providers., and so these cost savings could potentially be very, very meaningful for groups that have massive datasets, are looking for long-term sort of archival storage,.

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Think, internet archive or sort of medical records.

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Or things like that., I do think it's possible certain types of use cases.

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Could actually see cheaper storage on the filecoin system., but that sort of cost savings, I think, is only a tiny part of the story for why filecoin is interesting to me.

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The second thing that I think to me is hard to reason: about,, because it's kind of an unknown market size,, nobody really knows what will be possible or how this will emerge,, but it's basically a new sort of application.

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Being uniquely enabled by filecoin that can be managed by decentralized organizations.

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So in this sort of explosion of ethereum, decentralized, finance or defi,, we've really seen not just the smart contract.

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Based financial products, things like lending systems, trading, systems,, you know,, dexus,, we've also sort of simultaneously seen,.

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This sort of golden era of daos, start, or decentralized autonomous organizations,, where those financial products that are sort of based on smart contracts, are sort of owned and operated, so to speak,.

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By a decentralized network of token holders that sort of sit behind that smart contract system.

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And so this is sort of like the compound dao or the maker dao,, the yearn dao,.

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Other systems like that, that are offering this financial service, and rather than a corporation.

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Based in a specific geography or jurisdiction with traditionally sort of pen and paper, legally defined shareholders and rules and things like that;, you really have not just a financial product fully on chain,.

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You actually have the corporate structure itself, also on chain., and so all of the relationships and capital coordination.

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Between all of the sort of owners of the compound dao and the maker dao is all an on chain system..

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Now it's interesting to me, we've seen defi, be the major use case.

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For these daos, right?, so we've seen the emergence,. I think, for the first time, of, many multi hundred million dollar daos,.

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Defi has proven even more efficient capital, coordination,.

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I think than ico's did back in 2017.

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And so we've really seen like this dao like organizational structure.

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That's an on chain: corporation, is the way I kind of think about it, really finding product market fit with these defi products..

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So in defi you have these sort of two separate big breakthroughs..

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One is these on chain: smart contract based financial products,, and the second thing is the sort of bootstrapped, you know, internet, sovereign corporations, that sort of own and operate those financial services products., but defi is sort of a narrowing of something,.

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A word that used to be more popular in the cryptos world.

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Which was dapp or decentralized application.

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And defi is sort of a narrowing,.

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It's sort of a subset of the dapp category.

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And it's really just these financial, products.

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and there's,. I think a couple of reasons that these financial products have taken off more so than what we would generally think of.

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As like a web based application.

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One is that it's much easier.

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To program financial logic in a smart contract.

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Than it is to program complex application, logic.

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So for example,, a decentralized exchange system.

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Is probably easier to encode in a smart contract than a social media, network, like say twitter.

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But a second thing is that ethereum really doesn't have the capacity to serve up images.

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Or text through smart contract interactions to end users.

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Without relying on a central server,, so something like amazon web services., but one of the tricky things is that a smart contract can't really engage with a pen and paper legal contract with amazon web services..

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So smart contracts uniquely can use filecoin.

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And other sort of distributed storage systems.

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To serve up files to end users., so what this means is, I do think it is possible,.

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Filecoin can enable a new era of sort of decentralized autonomous organizations that own not just financial services products, but actually more complex and interactive web like applications..

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So you could imagine, not just an on chain exchange,.

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But actually sort of things like an on chain, you know, imgur, or an on chain, instagram,, whatever it might be,.

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That's sort of massive file storage capacity that needs to be served to the end-user.

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You can imagine dao like entities.

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Actually, owning and operating these sort of decentralized applications for the first time.

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That can expand beyond financial services use cases the way we see in defi today.. So I do think it's possible that filecoin is sort of the beginning of this new era that sort of,. I think we are entering the sort of golden age of daos,.

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Whereby we're not just turning money.

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Into a programmatic, algorithmic software based system.

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But actually the corporate structure itself and all of the relationships between the veritable shareholders, so to speak, of these various entities and all the capital coordination that occurs between their shareholders..

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So, rather than all of the systems being sort of pen and paper. Legal apparatuses,.

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They're these on chain token based relationships between people that can all coordinate their capital and sort of own and operate the services that are also embedded on the chain.

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And so I do think that filecoin represents.

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A massive step towards this future, where these dao, like structures, can actually own and operate major web like applications,.

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Not just financial services, products.

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and so financial services products, I think, is a massive, massive category..

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It could be 10 or 100 times bigger, easily than it is today.

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But I do think that, filecoin is a step towards.

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Even more complex and sort of web, like user experiences,.

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That can be owned by these dao, like entities.

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And I think that filecoin is a big step towards enabling that future., and so I think, we're still a ways away from decentralized, uber,, decentralized, twitter,.

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Really getting mainstream traction with end users.

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But I do think that filecoin is sort of a huge step in the right direction.

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And I'm very eager to watch the filecoin network evolve over the next few years and see what types of applications are sort of, uniquely enabled by the first sort of massive scale distributed.

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File storage system in the world.

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anyway, thanks everyone for listening..

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We have about five minutes left, so I'm just going to go to q&a.. If anybody has any questions, feel free to type them in the box, and I will try to get to all of them.

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So let me take a look at what people are asking.

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Okay, interesting., so what sort of interaction do you think filecoin will have with defi?.

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So I think that really narrowly.

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We're absolutely going to see bridges from filecoin to chains like ethereum and other smart contract enabled chains that have sort of defi like applications., and I think that filecoin, because of a lot of the value accrual characteristics.

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That I was talking about earlier might provide a very good sort of collateral.

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For a lot of defi, applications. and today,, most of defi sort of relies on this high quality collateral of some kind,.

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You know, ether, us dollar, stable coins.

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And all things like that. and I do think that filecoin could be.

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As kind of a first step,, just a very good type of collateral to use in the systems,.

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In part,, because it has this sort of value accrual characteristics that are quite differentiated from more speculative cryptocurrencies.

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Like say, bitcoin or ethereum or ether, itself.

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And so I think that filecoin in a way is a very,.

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It's just a very different type of cryptocurrency asset, much in the way that I think that, shares so to speak. Of these decentralized autonomous organizations offer sort of a different sort of value as well.

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And so the reasoning about why they have value,.

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It's kind of,, yes,, they're, all blockchain based assets, but they're, quite all different in my mind. so,. A lot of these dao like assets.

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Where you're owning a piece of a dao,, it's not like a cryptocurrency in the sense that that bitcoin is a currency.

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And I think filecoin is yet another kind.

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Of different category., it's not really a currency in the way that you would think of bitcoin as being a currency.. It's not really sort of a share in a dao,.

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It's yet some sort of new category of cryptocurrency asset,.

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Where yes, it's on a blockchain,, but I think that the the economic mechanisms of filecoin.

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Make it quite different than other sorts of assets?

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We've seen be blockchain based., and so I think that in a lot of these defi protocols.

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You want differentiated, uncorrelated types of collateral.

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Underlying a lot of lending agreements and things like that., and so I think that filecoin, because it's not just sort of another cryptocurrency,.

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It feels to me very much like a new type of asset..

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I think it could offer really a sort of differentiated collateral type that might be uncorrelated with other types of more traditional kind of currency like cryptocurrencies.

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Are you a ipfs maximalist for de-centralized storage,.

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And how do you see future competition in the decentralized storage space?.

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So,, I want to see this category succeed.

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By any means possible., I do think the out ipfs is.

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A really, really smart architecture.

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For building a decentralized file, storage, network., so a lot of people, maybe don't realize that ipfs has been a large scale. Engineering effort.

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And a massive open source project for many, many, many years before this filecoin economics sort of gasoline.

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Was added to the ipfs network., so ipfs is based on,.

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And I mentioned this very briefly: earlier, it's based on content-based addressing,, as opposed to location-based addresses..

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So when you think about ip addresses in the traditional internet,, when you click a hyperlink on the internet,, the request is going to a very specific location.

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So it's asking one server for a piece of content.

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And sort of serving that up to the end-user.

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And we're all used to getting this 404 not found error,, which basically means the server didn't, have the content that you requested.

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in the ipfs system,, instead of being location-based like that, it's content-based., and so what that means is, when I click a hyperlink, I'm routed to the nearest server that has that piece of content,.

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Because for a given image on the internet, there may be hundreds of different servers that have a copy of that image., and the ipfs system allows me to sort of route to the nearest one that can the most efficiently and cheaply, deliver it to me.

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and so that ipfs architecture, by being based on content.

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Rather than on location, is the perfect substrate to build a decentralized file storage marketplace on top of..

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So I don't want to say,, I'm not a maximalist of anything..

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I think that technology is always going to get better.

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And nothing is forever sort of,, but at the same time, I do think that ipfs is by far.

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The most sophisticated substrate that a decentralized file storage marketplace could be built on today., so I think we're out of time. thanks everyone for the questions. there's a couple more that I wasn't able to get to.

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But I want to thank everyone for having me., I'm very excited to continue to watch the filecoin network, grow and flourish.