Before you begin mining Filecoin, you need to determine whether or not your setup will truly earn a profit.

The price of Filecoin might fluctuate, and the number of miners has a significant impact on your profit potential.

The coin is becoming increasingly popular, and it is fair to say that you will have to stand out if you want to make decent money mining Filecoin.

Let’s see what you need to know and do to understand the process of Filecoin mining. 

Filecoin Mining Explained

Mining of the Filecoin platform differs from Bitcoin and other cryptocurrencies. Instead of supplying processing power, Filecoin miners provide storage space to meet customers’ data storage needs.

A Filecoin miner serves as a “database” in the Filecoin ecosystem.

Miners in the FIL can be classed into three categories:

1. Storage miners are the ones who store customer information. Earnings are exactly proportionate to the amount of storage created.
2. Retrieval miners get Filecoin based on the price established for their services. Their earnings are determined based on the speed and proximity of their service.
3. Repair miners have not yet been deployed in Filecoin mining, but their purpose is to intervene in the case of an unreliable miner.

Once a storage provider or storage miner has created a contract with a client, they preserve the evidence of their data storage. Anyone can verify the proof and determine whether or not the miner is reliable.

In contrast, retrieval miners or servers supply client data (from clients or storage miners) upon request.

Lastly, the Filecoin network employs Proof-of-Replication, Proof-of-Spacetime, and Proof-of-storage consensus for mining.

Mining Filecoin

Mining on the Filecoin platform differs from the traditional mining employed by Bitcoin and other cryptocurrencies.

Proof-of-Replication (PoRep) and Proof-of-Spacetime (PoST) are the two consensus techniques on the Filecoin network.

For Filecoin, instead of giving computational power, miners offer storage space to suit the data-storage needs of users and consumers. In other words, miners function as “databases” in the Filecoin ecosystem.

FIL tokens can be traded by five sorts of users: developers, customers, miners, token holders, and ecosystem partners.

Each Filecoin miner has a network-assigned power value proportional to the amount of space supplied. This value influences the likelihood of gaining the privilege to mine a block in each epoch.

In the Filecoin network, miners are rewarded in several ways for their contributions.

Three sorts of markets exist:

1. File storage;
2. File retrieval;
3. Token exchange.

When an agreement has been struck, customers often have to pay storage fees as a cost in exchange for the storage of their data and miners’ delivery of regular storage proofs to the blockchain.

Storage fees are also known as transaction fees. These transaction fees are temporarily stored upon receipt and then immediately deposited into a miner’s wallet as soon as the requirements associated with those fees have been met.

PoST window checks, also known as Proof-of-Spacetime checks, are done across the network at regular intervals of one day each to confirm that miners continue to host their required sectors normally.

Through mining blocks, miners can earn rewards and receive transaction fees proportional to the quantity of network storage space that they provide.

Winning PoST is the process that must be followed in order to be granted permission to mine a new block.

These incentives, unlike storage fees, are not paid by a consumer. Rather, the network “prints” fresh FIL tokens as an inflationary mechanism and an incentive for miners to go up the chain. Storage fees, on the other hand, are paid by consumers.

Each miner has the potential to earn transaction fees related to each message that is included in the block, in addition to the block reward that they receive.

Storage miners may also fight for special offers from verified patrons that require the miner to guarantee significant amounts of data storage in order to qualify for the offer. This is done as an incentive for data storage.

The recovery fees are paid gradually through the payment channels as the recovery agreements are successfully completed. These are the penalties that miners are required to pay if they are unable to maintain the sector’s reliability or if they want to leave the network voluntarily.

Last Steps

Last but not least, once you start mining, you will need a FIL-friendly wallet to store your profits.

The most popular Filecoin-compatible wallets include Lotus and Ledger Nano. These will give you an excellent degree of security, and you will always be able to access your crypto assets from wherever you might be.