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What is Filecoin (FIL)? How to Buy FIL

By Samuel Becker · October 27, 2021 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What is Filecoin (FIL)? How to Buy FIL

By now most people have heard of established cryptos, like Bitcoin or Litecoin. But it seems like every day there’s another newcomer on the scene. Filecoin (FIL) is one such cryptocurrency that is drawing curiosity.

While you may be familiar with some of the bare essentials of the crypto world — such as the basics of investing in crypto, or common crypto rules and regulations — you may have questions about under-the-radar assets like Filecoin. Just what is Filecoin? What is the Filecoin price? Is Filecoin a worthwhile investment?

Here, we’ll tell you everything you need to know about Filecoin crypto, including how to invest in it.

What is Filecoin (FIL)?

Filecoin is an open-source, decentralized, digital payment system. But it’s also more than that — it’s a cloud storage marketplace and protocol as well. And while Filecoin, or “FIL,” as it’s otherwise known, isn’t quite a household name like Bitcoin or Ethereum, it’s among the largest cryptos on the market.

The Filecoin network is a cloud-based online storage system that’s decentralized — it’s operated by users, not a central company or owner. FIL is the token that’s used as a currency on its own network.

The History of Filecoin Crypto

Filecoin is made by Protocol Labs, and it hit the market after an ICO, or “initial coin offering,” in 2017. It was founded by Juan Benet, the creator of the Interplanetary File System , on which the Filecoin system operates. Effectively, the Filecoin system rents out hard drive space, those deals are registered using blockchain technology, and FIL is used to facilitate those deals.

What drives Filecoin’s value is the scarcity of hard drive space and available data storage. Pretty much everything these days (online, at least) relies on the ability to store and recall data. Consider how much data, code, and information is needed to keep even just one website up and running.

Filecoin’s data storage network provides additional storage to the market, and often at lower prices than bigger names in data storage, which control the lion’s share of “the cloud.”

How Does FIL Work?

Filecoin doesn’t use a central server. Instead, data is stored on a peer-to-peer blockchain — effectively on users’ computers. The Filecoin network lets anyone buy or rent out space on their hard drives, augmenting the data storage market. And within the FIL network, there are a few groups of users:

•   Clients: Those who pay to store or retrieve data or information.

•   Storage miners: Those who store a client’s data in exchange for a reward.

•   Retrieval miners: Those who can retrieve a client’s data when it’s requested.

These three groups interact with each other within the network, exchanging data as part of the storage or retrieval process, and issuing micropayments to each other, using the FIL token.

Filecoin Price

FIL’s value really started to take off in early 2021, peaking at more than $190 in April, but falling below $140 in the months that followed. As of mid-October 2021, its price hovered just over $70.

FIL tokens are valuable because they have utility on the decentralized cloud storage network. FIL tokens can be purchased or traded for, like most other cryptocurrencies.

Should You Invest in FIL?

As with any crypto, investing in FIL has its risks. Aside from the inherent volatility of the crypto market, traders and investors may be on the hook for cryptocurrency taxes if they transact in FIL.

In addition, it has limited use: FIL is illiquid outside of a crypto exchange or on the Filecoin network. For example, it’s unlikely anyone would be able to, say, pay for an oil change for their car, or buy a pizza using FIL. You’d have to trade it for U.S. dollars to then make your purchase unless you can come to an agreement with a business owner for a good or service.

That said, there’s always a chance that FIL could gain value in the coming months and years, potentially earning investors a solid return. But nobody can predict the future — and even past performance is not an indicator of future success.

How to Buy FIL Cryptocurrency

Adding FIL to one’s crypto holdings is pretty much the same procedure as, say, buying Bitcoin or another cryptocurrency. Here’s how to do it:

1.    Open and fund an account with a crypto broker or exchange. Make sure you have a solid idea of how crypto exchanges work so that you know what to expect — and confirm that your intended broker allows you to trade FIL.

2.    Get a crypto wallet. You’ll need a wallet to hold your crypto. Some brokers provide users with a wallet, but doing some research will help you figure out what type of wallet, and what level of protection, is right for you.

3.    Use your funded account to trade. With money in an exchange or broker’s account, you should be able to simply look up FIL on the platform, decide how much you’d like to trade, and execute. It’s more or less the same process as buying stock from a broker.

4.    Transfer your FIL to your wallet. If you’ve decided to use a specific wallet (not provided by your broker or exchange), you’ll want to transfer your holdings out of the exchange and to your wallet for crypto storage.

Recommended: What is a Crypto Wallet?

The Takeaway

The Filecoin network is a decentralized cloud-based online storage system, and its token, FIL, is used on the network as payment between clients, storage miners, and retrieval miners. As an investment, this crypto is as volatile as any other cryptocurrency, with potential for gains and losses (and no way to predict which will happen when, if at all).

If you’re looking to add cryptocurrency to your portfolio, try the SoFi Invest® online trading platform. You can trade dozens of cryptocurrencies including Bitcoin, Litecoin, Cardano, Dogecoin, Solana, Enjin Coin, and Ethereum.

Find out how to get started with SoFi Invest.

Photo credit: iStock/tiero

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