What Filecoin does
Filecoin is a decentralised storage network built by Protocol Labs on top of the InterPlanetary File System (IPFS). Storage providers pledge disk space and FIL collateral, then get paid in FIL to store client data, with cryptographic proofs — Proof-of-Replication and Proof-of-Spacetime — verifying on-chain that the data is actually being held, not just claimed. A separate retrieval market lets clients pull data back out, ideally from whichever provider can serve it fastest and cheapest.
The 2023 launch of the Filecoin Virtual Machine (FVM) added Ethereum-compatible smart contracts to the network, opening the door to programmable storage deals, on-chain reputation for providers, and DeFi-style products built around storage capacity itself — things like perpetual storage funds and data DAOs that didn't exist when Filecoin was just a storage marketplace.
The utilisation problem
Filecoin's headline numbers are enormous — several exabytes of committed raw storage — but a large share of that capacity is what's called 'committed capacity': space providers pledge to earn block rewards without any real client data behind it. Actual client-paid, useful data has historically made up a small fraction of total capacity, and it's the gap crypto sceptics point to most often when they call Filecoin a mining game dressed up as a storage network.
Risks
FIL's supply schedule is unusually front-loaded with vesting: storage providers must lock a large share of block rewards for months before it unlocks, which has produced persistent, mechanical sell pressure as new supply matures regardless of demand. Filecoin also competes with Arweave for permanent storage narratives and, more importantly, with Amazon S3 and Google Cloud, which remain cheaper, faster and far easier to integrate for the overwhelming majority of real-world storage needs. Decentralised storage adoption outside crypto-native use cases has been slow to materialise.