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IPFS is really just a mix of a torrent tracker with a torrent client, but once IPFS VMs start paying for themselves, people will sign-up in masses. I guess that

by fg6hr 6y ago

IPFS is really just a mix of a torrent tracker with a torrent client, but once IPFS VMs start paying for themselves, people will sign-up in masses. I guess that's what Filecoin is about. Edit: The way I see filecoin working is anyone can post a reward for a file and once the file is provided, the reward is paid. In other words, it's bit like a brokerage that connects downloaders with uploaders. The difficultly is that this brokerage needs to be distributed and resilient.

rglullis 6y ago
I am yet to write more about this, but one thing that bothers me with Filecoin: the economics don't add up. The price per GB stored will tend to reach an equilibrium around the commodity price - i.e, costs of disks+computers+electricity+internet. Unless I am missing something, if the price gets higher, more people would buy disks and put them online, bringing the price down. If that is true, it means that a node can only be profitable if you are freeloading. And if you are freeloading, any price you get will be good which means that it tends to go even further down, perhaps even below the commodity cost. I may be missing something, but I really don't see this going beyond techies with spare disks playing around and definitely no way to run a Filecoin node on a VPS profitably.
- anchpop 6y ago
  That is actually the intent of filecoin. In perfect competition, which is the ideal state for a commodity, there is no economic profit. The reason Amazon and other companies are able to make a profit selling cloud storage is because there is not yet perfect competition. Right now if I wanted to compete with Amazon, I could buy 2 or 3 petabytes of storage space and some bandwidth. But nobody would trust me not to lose their data. This is the differentiation that makes cloud storage less of a commodity than it could be. The goal with filecoin is to make it so you don't have to trust me, just some general guarantees about the filecoin network. If amazon for some reason was selling storage on this network, I could compete with them on equal footing (and whoever sold it more cheaply would win). Many commodities are in close-to-perfect competition. For instance, I don't care if grain comes from England or France, just that it's cheap. While it is very hard to make an economic profit selling grain, many people do farm grain and make enough money to support themselves (The money you pay your workers to survive is one of the costs of producing grain. That's true even if the only worker is you) If you could make a profit by running a filecoin node on a VPS, everyone would do that. By competing with each other you'd all bring the price down and down until it was no longer more profitable than selling any other commodity (and maybe even lower). So you're right to not expect to be able to do that.
  - rglullis 6y ago
    Your arguments do not follow: > which is the ideal state for a commodity, there is no economic profit. No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded) > While it is very hard to make an economic profit selling grain, many people do farm grain and many enough money. The analogy here would be to get people to (a) "farm" disks (and electricity/internet) and (b) with some profit to justify their work. (a) is impossible (except for freeloaders) and you agree with me that (b) seems to be unlikely. So the question is: who would be interested in taking the supply side of the filecoin network, when there is no profit to be made?
    - scoopertrooper 6y ago
      > No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded) You could hardly say a market dominated by a giant state-sanctioned cartel was a good example of a commodity market in the state of perfect competition. > So the question is: who would be interested in taking the supply side of the filecoin network, when there is no profit to be made? There would likely be some short term economic profits at the beginning, which would attract market entrants. The economic profit would tend to zero over time, but keep in mind economic profit as a concept incorporates the notion of the entrepreneur paying themselves a competitive wage for their time.
      - rglullis 6y ago
        > giant state-sanctioned cartel... Point still stands. All else being equal, oil from Saudi Arabia is the same as the oil from Canada or Denmark. If you don't want to use oil as an example, use coffee, milk, chicken meat, soy, cotton, oranges, electricity, potable water... > There would likely be some short term economic profits at the beginning, which would attract market entrants. The first market entrants are the ones selling extra capacity they have. For those that already have sunk costs of the disks, sure, they can make a profit on this. My point is that once that capacity is gone and there is more demand for data, people will have to actually go and buy disks and let them run 24/7, and this would cost more per GB stored than they will be able to sell.
- AgentME 6y ago
  If there's enough enthusiasts using spare disks at home to offer enough disk capacity for everyone, then that means Filecoin hosting will be available cheaper than cloud hosts. If all that capacity gets used up, then supply and demand will cause the price to go up until more people add capacity. If the price hits the price of cloud hosts, then people will just run tons of Filecoin nodes on cloud hosts, so the price of cloud hosting will be the upper bound on Filecoin hosting prices. Then anyone that can undercut the cloud hosts will be free to run their own Filecoin nodes, and the price will be pushed down as people do this.
  - rglullis 6y ago
    > If there's enough enthusiasts using spare disks (...) then that means Filecoin hosting will be available cheaper than cloud hosts Ok. Agreed. > If all that capacity gets used up, then supply and demand will cause the price to go up until more people add capacity. Agreed. > If the price hits the price of cloud hosts, then people will just run tons of Filecoin nodes on cloud hosts. Not necessarily. I can just buy more disks and run locally, whether for hosting my data or to sell the space on the network, which brings the price back to people-selling-spare-disk-space-for-cheap level. > Then anyone that can undercut the cloud hosts will be free to run their own Filecoin nodes, and the price will be pushed down as people do this. Yeah, but that is kind of my point. Everyone will undercut each other until the price hits the bottom. The equilibrium will be at most the commodity price.
  - jhoechtl 6y ago
    That means average home user bandwidth costs will go up? The unlimited download, flat-rate, fair use plan your home lan connects to the internet can be provided because your connection is lingering 90% of its time practically unused (besides all sorts of home appliance phoning home). If you are using this seemingly free connection capacity, internet access rates should go up, because there is no such thing as a free lunch?
  - Nursie 6y ago
    > If there's enough enthusiasts using spare disks at home to offer enough disk capacity for everyone, then that means Filecoin hosting will be available cheaper than cloud hosts. Only if these enthusiasts are willing to take a loss on power. > If the price hits the price of cloud hosts, then people will just run tons of Filecoin nodes on cloud hosts Or the cloud hosts themselves will enter the market. The upper bound on the market will be their costs, which will always be lower than the costs of enthusiasts using spare disks at home.
- lodi 6y ago
  I think you're conflating different definitions of "profit". There's at least three important ones: 1) Accounting profit: revenue - expenses. This is colloquially what most people mean when they say "profit". To break even you just need to make enough money to cover your explicit expenses. In your example, you would need to make more in Filecoin income than you spent in disks/electricity/etc. 2) "Normal profit": this is a technical term in microeconomics. Basically this takes into account opportunity cost; the cost of not doing some other profitable thing with your time/money. By these standards, to break even you'd not only have to cover the cost of disks/electricity but also the "opportunity costs" of whatever else you could have been doing with those disks/electricity (like mining Bitcoin), or whatever you could have been doing if you never even purchased those disks to begin with (like investing in the S&P or whatever). 3) "Excess" or "economic" profits. These are extra profits on top of whatever you earn in #2. This is the part that goes to 0 for commodities like milk/gasoline/Filecoin but is non-zero for differentiated products like iphones. For Filecoin specifically, I would expect that normal profits would probably be above the raw costs of disks and electricity, since it takes some effort to purchase and administer all that hardware, but probably below the cost of renting a VPS, since a VPS is typically used for more profitable things than just sitting around and holding stuff on disk.
  - rglullis 6y ago
    Thanks for the breakdown of "profit" definitions, but I still think that all of these observations are largely missing the point... > I would expect that normal profits would probably be above the raw costs of disks and electricity, since it takes some effort to purchase and administer all that hardware No, it doesn't. Most of the people selling the idea of distributed file storage (Filecoin, Storj, Sia) are thinking about getting the excess capacity of everyone's disks and turning into a marketplace. Getting the hardware and administering are sunk costs. Participants are only supposed to download a client, indicate the payout method and ensure that they don't turn off their computers. It's a one-off effort. Even understanding (or pretending to understand) all of the crypto-babble in order to get paid is something that people are supposed to do only once. This is the part where these different projects are working out their market dynamics and where I get lost about Filecoin: - With Storj (and Sia, I believe) the price of the data is determined by the governors of the network. Storj last rollout was paying $5/TB-month for every client. There is no bidding war. As long as you could prove you held the data for that period, you would get the money. This makes sense for me - no matter if I am some dude in a basement with a disk on my laptop or if I am a datacenter and I get to charge more than $5/TB-month from my usual customers, my excess capacity can be sold for $5/TB-month and this becomes a simple matter of waiting for the demand to grow. - With Filecoin the idea is to have a completely open market, where each node says how much they are willing to charge for the data, and what are the constraints (availability, time to retrieval, etc). This leads to possible (inevitable?) bidding wars. No matter the demand curve, there is always someone who will be willing to put the lowest price possible that gets them "something". For excess capacity, this "something" can be effectively zero or whatever is the lowest price possible in the bid. And if it can be zero, the only thing I see helping them would be if the nodes starting cooperating with each other and acting like a cartel. To be honest, even Storj and Sia are hard sells for me. I wouldn't bet on these projects for a long run and I don't believe that they will actually threaten the current players, but at least I understand the incentive structure. With Filecoin, it can only be profitable when the demand for data storage grows faster than the storage capacity from the network, but no so profitable as to attract people from the demand-side to the supply-side. It's crazy.
StreamBright 6y ago
>> but once IPFS VMs start paying for themselves How does that work in real life?
- WJW 6y ago
  This looks a lot like the common fallacy (in blockchain circles) that anything that is _possible_ is also _inevitable_. There is no reason at all why IPFS VMs would be profitable in the long term, especially since VM hosters are not stupid and would just dedicate their capacity to IPFS themselves, cutting out the middle man. Of course, in the shorter term there are many different scenarios where the market is slower to adjust. The STORJ network has been subsidizing their node operators with VC money for example, leading to some excellent unit economics for the early adopters.

by fg6hr 6y ago

rglullis 6y ago

I am yet to write more about this, but one thing that bothers me with Filecoin: the economics don't add up. The price per GB stored will tend to reach an equilibrium around the commodity price - i.e, costs of disks+computers+electricity+internet. Unless I am missing something, if the price gets higher, more people would buy disks and put them online, bringing the price down. If that is true, it means that a node can only be profitable if you are freeloading. And if you are freeloading, any price you get will be good which means that it tends to go even further down, perhaps even below the commodity cost. I may be missing something, but I really don't see this going beyond techies with spare disks playing around and definitely no way to run a Filecoin node on a VPS profitably.

anchpop 6y ago
That is actually the intent of filecoin. In perfect competition, which is the ideal state for a commodity, there is no economic profit. The reason Amazon and other companies are able to make a profit selling cloud storage is because there is not yet perfect competition. Right now if I wanted to compete with Amazon, I could buy 2 or 3 petabytes of storage space and some bandwidth. But nobody would trust me not to lose their data. This is the differentiation that makes cloud storage less of a commodity than it could be. The goal with filecoin is to make it so you don't have to trust me, just some general guarantees about the filecoin network. If amazon for some reason was selling storage on this network, I could compete with them on equal footing (and whoever sold it more cheaply would win). Many commodities are in close-to-perfect competition. For instance, I don't care if grain comes from England or France, just that it's cheap. While it is very hard to make an economic profit selling grain, many people do farm grain and make enough money to support themselves (The money you pay your workers to survive is one of the costs of producing grain. That's true even if the only worker is you) If you could make a profit by running a filecoin node on a VPS, everyone would do that. By competing with each other you'd all bring the price down and down until it was no longer more profitable than selling any other commodity (and maybe even lower). So you're right to not expect to be able to do that.
- rglullis 6y ago
  Your arguments do not follow: > which is the ideal state for a commodity, there is no economic profit. No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded) > While it is very hard to make an economic profit selling grain, many people do farm grain and many enough money. The analogy here would be to get people to (a) "farm" disks (and electricity/internet) and (b) with some profit to justify their work. (a) is impossible (except for freeloaders) and you agree with me that (b) seems to be unlikely. So the question is: who would be interested in taking the supply side of the filecoin network, when there is no profit to be made?
  - scoopertrooper 6y ago
    > No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded) You could hardly say a market dominated by a giant state-sanctioned cartel was a good example of a commodity market in the state of perfect competition. > So the question is: who would be interested in taking the supply side of the filecoin network, when there is no profit to be made? There would likely be some short term economic profits at the beginning, which would attract market entrants. The economic profit would tend to zero over time, but keep in mind economic profit as a concept incorporates the notion of the entrepreneur paying themselves a competitive wage for their time.
    - rglullis 6y ago
      > giant state-sanctioned cartel... Point still stands. All else being equal, oil from Saudi Arabia is the same as the oil from Canada or Denmark. If you don't want to use oil as an example, use coffee, milk, chicken meat, soy, cotton, oranges, electricity, potable water... > There would likely be some short term economic profits at the beginning, which would attract market entrants. The first market entrants are the ones selling extra capacity they have. For those that already have sunk costs of the disks, sure, they can make a profit on this. My point is that once that capacity is gone and there is more demand for data, people will have to actually go and buy disks and let them run 24/7, and this would cost more per GB stored than they will be able to sell.
AgentME 6y ago
If there's enough enthusiasts using spare disks at home to offer enough disk capacity for everyone, then that means Filecoin hosting will be available cheaper than cloud hosts. If all that capacity gets used up, then supply and demand will cause the price to go up until more people add capacity. If the price hits the price of cloud hosts, then people will just run tons of Filecoin nodes on cloud hosts, so the price of cloud hosting will be the upper bound on Filecoin hosting prices. Then anyone that can undercut the cloud hosts will be free to run their own Filecoin nodes, and the price will be pushed down as people do this.
- rglullis 6y ago
  > If there's enough enthusiasts using spare disks (...) then that means Filecoin hosting will be available cheaper than cloud hosts Ok. Agreed. > If all that capacity gets used up, then supply and demand will cause the price to go up until more people add capacity. Agreed. > If the price hits the price of cloud hosts, then people will just run tons of Filecoin nodes on cloud hosts. Not necessarily. I can just buy more disks and run locally, whether for hosting my data or to sell the space on the network, which brings the price back to people-selling-spare-disk-space-for-cheap level. > Then anyone that can undercut the cloud hosts will be free to run their own Filecoin nodes, and the price will be pushed down as people do this. Yeah, but that is kind of my point. Everyone will undercut each other until the price hits the bottom. The equilibrium will be at most the commodity price.
- jhoechtl 6y ago
  That means average home user bandwidth costs will go up? The unlimited download, flat-rate, fair use plan your home lan connects to the internet can be provided because your connection is lingering 90% of its time practically unused (besides all sorts of home appliance phoning home). If you are using this seemingly free connection capacity, internet access rates should go up, because there is no such thing as a free lunch?
- Nursie 6y ago
  > If there's enough enthusiasts using spare disks at home to offer enough disk capacity for everyone, then that means Filecoin hosting will be available cheaper than cloud hosts. Only if these enthusiasts are willing to take a loss on power. > If the price hits the price of cloud hosts, then people will just run tons of Filecoin nodes on cloud hosts Or the cloud hosts themselves will enter the market. The upper bound on the market will be their costs, which will always be lower than the costs of enthusiasts using spare disks at home.
lodi 6y ago
I think you're conflating different definitions of "profit". There's at least three important ones: 1) Accounting profit: revenue - expenses. This is colloquially what most people mean when they say "profit". To break even you just need to make enough money to cover your explicit expenses. In your example, you would need to make more in Filecoin income than you spent in disks/electricity/etc. 2) "Normal profit": this is a technical term in microeconomics. Basically this takes into account opportunity cost; the cost of not doing some other profitable thing with your time/money. By these standards, to break even you'd not only have to cover the cost of disks/electricity but also the "opportunity costs" of whatever else you could have been doing with those disks/electricity (like mining Bitcoin), or whatever you could have been doing if you never even purchased those disks to begin with (like investing in the S&P or whatever). 3) "Excess" or "economic" profits. These are extra profits on top of whatever you earn in #2. This is the part that goes to 0 for commodities like milk/gasoline/Filecoin but is non-zero for differentiated products like iphones. For Filecoin specifically, I would expect that normal profits would probably be above the raw costs of disks and electricity, since it takes some effort to purchase and administer all that hardware, but probably below the cost of renting a VPS, since a VPS is typically used for more profitable things than just sitting around and holding stuff on disk.
- rglullis 6y ago
  Thanks for the breakdown of "profit" definitions, but I still think that all of these observations are largely missing the point... > I would expect that normal profits would probably be above the raw costs of disks and electricity, since it takes some effort to purchase and administer all that hardware No, it doesn't. Most of the people selling the idea of distributed file storage (Filecoin, Storj, Sia) are thinking about getting the excess capacity of everyone's disks and turning into a marketplace. Getting the hardware and administering are sunk costs. Participants are only supposed to download a client, indicate the payout method and ensure that they don't turn off their computers. It's a one-off effort. Even understanding (or pretending to understand) all of the crypto-babble in order to get paid is something that people are supposed to do only once. This is the part where these different projects are working out their market dynamics and where I get lost about Filecoin: - With Storj (and Sia, I believe) the price of the data is determined by the governors of the network. Storj last rollout was paying $5/TB-month for every client. There is no bidding war. As long as you could prove you held the data for that period, you would get the money. This makes sense for me - no matter if I am some dude in a basement with a disk on my laptop or if I am a datacenter and I get to charge more than $5/TB-month from my usual customers, my excess capacity can be sold for $5/TB-month and this becomes a simple matter of waiting for the demand to grow. - With Filecoin the idea is to have a completely open market, where each node says how much they are willing to charge for the data, and what are the constraints (availability, time to retrieval, etc). This leads to possible (inevitable?) bidding wars. No matter the demand curve, there is always someone who will be willing to put the lowest price possible that gets them "something". For excess capacity, this "something" can be effectively zero or whatever is the lowest price possible in the bid. And if it can be zero, the only thing I see helping them would be if the nodes starting cooperating with each other and acting like a cartel. To be honest, even Storj and Sia are hard sells for me. I wouldn't bet on these projects for a long run and I don't believe that they will actually threaten the current players, but at least I understand the incentive structure. With Filecoin, it can only be profitable when the demand for data storage grows faster than the storage capacity from the network, but no so profitable as to attract people from the demand-side to the supply-side. It's crazy.

StreamBright 6y ago

>> but once IPFS VMs start paying for themselves How does that work in real life?

WJW 6y ago
This looks a lot like the common fallacy (in blockchain circles) that anything that is _possible_ is also _inevitable_. There is no reason at all why IPFS VMs would be profitable in the long term, especially since VM hosters are not stupid and would just dedicate their capacity to IPFS themselves, cutting out the middle man. Of course, in the shorter term there are many different scenarios where the market is slower to adjust. The STORJ network has been subsidizing their node operators with VC money for example, leading to some excellent unit economics for the early adopters.