Tuesday marks the milestone launch of the Filecoin Virtual Machine (FVM). Similar to Ethereum Virtual Machine (EVM), but for smart contracts on the Filecoin network, FVM aims to make the open storage economy more attractive to developers and users.

What Is Filecoin (FIL)?

We all know Bitcoin’s core concept. Decentralized, trustless, and incentive-driven network to eliminate counterparty risk and create sound money. Filecoin is applying the trustless and incentive-driven bitcoin model of eliminating counterparty risk to data storage. As such, the San Francisco-based Protocol Labs launched the Filecoin network in September 2020 after raising $257 million in 2017’s ICO.

Headed by Juan Benet, an American computer scientist, and entrepreneur, Protocol Labs also created the InterPlanetary File System (IPFS) currently by Taiwan’s Ministry of Digital Affairs and approximately 2 million other unique weekly users.

The Filecoin network should not be conflated with IPFS. While both are decentralized storage solutions, Filecoin is built on top of IPFS as the marketplace for storage providers (miners) where they compete for storage contracts.

Therefore, IPFS is the underlying protocol for sharing and storing files, enabling Filecoin (FIL) to create a decentralized storage marketplace. With the FIL token, users can buy and sell storage space alongside participating in the network’s consensus and governance.

Filecoin miners are rewarded in FIL for providing storage and data retrieval. On the other end, users pay in FIL for their needed storage space.

How Does Filecoin Work?

Even before blockchain and broadband internet, redundancy and data security were synonymous. If information is stored in a centralized location, it is inherently vulnerable. Filecoin’s application of blockchain technology distributes data across the world’s storage nodes run by FIL miners.

In addition, Filecoin also uses end-to-end encryption to protect the stored data, so only the owner can access it. This makes stored data both redundant and secure against network outages.

To bolster decentralization, both IPFS and Filecoin rely on Content IDs (CIDs). This is the core component of the storage network. CIDs serve as unique identifiers that locate the stored content, similar to how URLs find web content. Consequently, content can be stored and retrieved regardless of which physical node it is on the network.

Alongside CIDs’ content-based addressing and retrieval, they also track and verify storage deals between users and storage providers, the FIL miners. As of January 2023, the Filecoin network accrued nearly 6 million CIDs among 1,105 unique providers. The Filecoin network facilitated about 18 million storage deals, amounting to 494.9 pebibytes (PiB) worth of data.

However, the current total capacity of the Filecoin network is 19 exbibytes (EiB).

This means that Filecoin’s current utilization percentage is only 2.6%. In this light, what does Filecoin Virtual Machine (FVM) bring to ramp up the network’s utilization rate?

Filecoin’s FVM Implications

Just like Ethereum Virtual Machine (EVM) enables developers to code and deploy dApps on Ethereum, the same is now possible for Filecoin. Both are programming frameworks that execute code on a blockchain network in a standardized fashion.

While node providers enact the blockchain’s consensus mechanism, virtual machines run on top to execute smart contracts bridged to the user-facing dApp interface. But what does it mean that Filecoin Virtual Machine (FVM) now provides a standardized environment to execute smart contracts on the Filecoin network?

Specifically, FVMuses a WASM-based polyglot execution environment for IPLD data. In non-jargon terms, this has several important implications.

• Standing for WebAssembly, WASM is a low-level bytecode format that can be used to run code in web browsers and other environments. As FVM is WASM-based, it can support smart contract coding in multiple programming languages compiled into WebAssembly.
• Hence, the ‘polyglot’ term. Building on top of that is IPLD data, standing for InterPlanetary Linked Data. This format allows FVM to represent and link data across decentralized networks like Filecoin or Ethereum. As a result, IPLD’s universal format makes it easier to build dApps that can interact with data from multiple sources.

In short, the new Filecoin Virtual Machine (FVM) opens the floodgates to developers. They can write smart contract code in their preferred programming language as long as it can be compiled into WebAssembly. This significantly expands Filecoin’s flexibility as it lowers the barrier to entry.

A Data-Driven Economy?

What can developers do with FVM, given its data-centric nature? As explained, the execution framework runs on top of the Filecoin consensus layer. Consequently, FVM doesn’t directly interact with data stored on the network’s nodes. But, FVM can control how that data gets utilized, stored, edited, and maintained.

In practical terms, this translates to Data DAOs, standing for decentralized autonomous organizations. As a type of dApps, these blockchain-based data repositories can be created for various purposes: research databases, indexing NFT collections, blockchain-based Wikipedia, gaming metaverse assets, etc.

In turn, developers could tokenize stakes in such Data DAOs and make them marketable. These tokens would then provide an incentive mechanism to pay for services related to data analysis or even to bolster the collection of raw data. Consequently, this is the baseline for creating a feedback loop for a new data-centric economy.

Regarding finance, Filecoin’s team sees FVM as helping create time-locked transactions using external beacons. This would be handy in futures trading, as developers could program transactions to occur at a specific time.

Likewise, developers could prevent unauthorized access to sensitive financial data. This is made possible with a capability-orientation programming model that restricts access to specific resources, in this case, storage. For example, this could also restrict unauthorized access to a blockchain-based Wikipedia.

Additionally, FVM’s native primitives for cross-chain interoperability enable developers to code smart contracts that interact with other blockchains, facilitating financial services across multiple networks.

Lastly, FVM could help developers in providing computation correctness proofs. These are mathematical proofs that their code is correct and will execute as intended, improving the security of financial dApps on Filecoin. WebAssembly (WASM) is a sandbox environment that can prevent malicious code from compromising the network’s security.

This article originally appeared on The Tokenist

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