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Filecoin, the Airbnb of the Decentralized Web

Updated: Jul 13, 2021

Make Your Apartment Pay its Own Rent was one of Airbnb’s promises to landlords with an empty room to spare. Take some photos, put up a post, and soon people will be lining up on your doorstep with handfuls of cash. Protocol Labs might have a similar offering today for people with hard disk space to spare.

Image by Pixabay

In its attempt to create a decentralized alternative to the internet that we currently use, Protocol Labs faces the challenge of creating hosting space in a virtual network that contains no web hosting locations.

While major providers on the decentralized web offer different incentives to encourage the creation of hosting nodes (storage space), Protocal Labs has gone a step further in creating a marketplace for hosting space, where buyers are website creators looking for storage space and sellers are nodes operators with empty storage space to “rent.” The currency in this marketplace is Filecoin, a cryptocurrency solely created for the decentralized web.

Under this model, individuals or companies with spare storage space can act as hosts for website creators - this is known as mining in the industry (similar to Bitcoin mining). The model would later develop into a market, allowing owners of Filecoin to exchange it directly with hosting providers, creating a live market where buyers can bid for access to hosting services. Protocol Labs expect the usability and value of its Filecoins to act as a major incentive for sellers and buyers in this market, resulting in the large-scale adoption of its decentralized web project. This same source of market energy has been used by Airbnb, allowing it to conquer the short-term rental market in record time.

The price of Filecoin is variable and would depend on several factors once the market is established. The price of storage space (in Filecoins) would depend on the availability of supply, mimicking Airbnb’s model in terms of availability-based pricing for its accommodation. The higher the supply, the lower the price of storage space.

In addition, the overall storage space available would also have an effect on the availability and overall supply of Filecoins: the more space provided for hosting, the greater the supply of Filecoins and the lower the price of storage units.

Moreover, services related to hosting would also have an impact on the hosting price. As you may be charged a premium for additional services, such as breakfast, at your Airbnb rental, in the hosting space, quality would relate to reliability and security. For example, you may pay a premium for websites which are less prone to crashing, or for backup facilities for your website data.

Finally, the overall demand for hosting space is key in determining the need - and therefore the price - of hosting spaces for website information. The higher the demand, the higher the price.

The Filecoins market undoubtedly has great potential and could be a major force paving the way for the use and spread of decentralized web hosting activities. However, as in any market, there is a risk that some Filecoin miners and web data hosts may monopolize the marketplace. Both Bitcoin mining and Airbnb hosting are clear examples of this risk. Bitcoin miners are becoming more and more sophisticated and have joined forces to solve the computational problems required to maintain the Bitcoin ledger. Specialized commercial Airbnb operators have mushroomed and are gaining more and more of the market share, consolidating their efforts and growing in influence within the network of Airbnb hosts.

Bitcoin Mining image via Marko Ahtisaari licensed under CC BY 2.0

It is highly likely that a similar pattern may materialize in the Filecoin market which would eventually give a disproportionate amount of power to some hosts. When this power is acquired, what prevents a takeover of the decentralized web by one or an alliance of these hosts with a common agenda? Could the tools and technologies at the heart of a decentralized web be the same tools employed in its takeover?

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