Understanding Filecoin’s Circulating Supply
According to Filecoin’s page on CoinMarketCap, the circulating supply of the network’s native utility token FIL is 136,672,559 at the time of writing. But what exactly does this number mean and how is it determined? A coin or token’s circulating supply is simply the total quantity that are available for trade on the market. This article will explain a bit about Filecoin’s circulating supply, where it comes from, and what it means for the network.
Filecoin’s native token FIL is first and foremost a utility token that’s meant to give holders a right to use the network. The official Filecoin blog post “Understanding Filecoin Circulating Supply” compares the Filecoin network to an Island Economy wherein “participants come together to produce valuable storage goods and services and export them to the world”. Within the network, different storage providers have their own unique characteristics including smart contracts systems, lending services, use cases, and more. Each could become their own business and the network’s utility is “reflected in the attractiveness of those goods and services that participants produce in the network”.
There will only ever be 2,000,000,000 (2 billion) Filecoin, and in order to maintain the long-term health and vision of the network, Filecoin minting has been set up in such a way that the majority of its supply would only be minted if the network reached several ambitious targets in terms of growth and utility. The model in which FIL tokens are minted is called a dual minting model comprised of both Simple and Baseline minting.
330 million FIL tokens are to be released on a 6-year half-life based on time, meaning 97% of these tokens will be released in about 30 years from now. This allocation is minted independently of agent actions in order to provide counter pressure in the event of price shocks.
The majority of the Storage Mining Allocation is minted based on the network’s performance, up to 770 million FIL tokens, which creates a strong incentive for network participants to collaborate with one another and reach storage capacity targets. According to the team, “[t]he full release of these tokens would only occur if the Filecoin network reached a Yottabyte of storage capacity in under 20 years”. For reference, a Yottabye is 1,000,000,000,000 (one trillion) Terabytes.
Additionally, there are 300 million FIL tokens held in reserve in order to incentivize future types of mining. How these tokens will be released, and which sets of stakeholders should be incentivized is up to the community.
The Filecoin network is intended to last for a very long time, therefore it’s been set up to utilize a vesting mechanism which distributes rewards slowly over a period of time in order to incentivize long-term community alignment, reduce short-term speculation, and encourage all community members to work together to help the network in the long-term.
This vesting mechanism applies to all mining rewards, SAFT (Simple Agreement for Future Tokens) investors (early investors who helped fund the project), the Filecoin Foundation’s 100M FIL allocation, and Protocol Labs’s 300M FIL allocation.
In crypto, to burn an asset is to completely remove it from circulation by sending it to an irrecoverable burn wallet address. Many crypto projects with high token supplies will burn large quantities to create a sense of scarcity. In the Filecoin network, token burning can happen in one of two ways: from a portion of the gas fees required for transactions and via their slashing penalization.
Like with any blockchain, each transaction in the Filecoin network incurs what’s called a gas fee, the cost of “fuel” that compensates for the computation and storage resources on-chain messages consume. As outlined in the Filecoin blog post about gas fees and how they work, a portion of each gas fee from every transaction will be forever burned, thereby slowly decreasing the token’s circulating supply.
Additionally, network participants that go against the project’s best interests are penalized via slashing, which “come from collaterals participants must post, or potential rewards participants might have earned”. If for example, a storage provider is found to be dishonest about hosting a client’s file, having violated their agreement, they will be slashed and the potential rewards tokens they would have received will be detracted from their balance and burned. For more info on slashing and how it works, check out its page on the Filecoin docs repository.
Due to Filecoin’s unique minting methods, vesting mechanisms, and tokens being burned from a combination of gas fees and slashing penalties, the circulating supply of Filecoin is constantly changing. The most up-to-date quantity can be found on a coin aggregator site such as CoinMarketCap or Messari. For a more in-depth look at the technical details behind Filecoin’s circulating supply, please see the Filecoin team’s official article at: Filecoin Circulating Supply.
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