By Pavel Leonov
Monday, August 13, 2017
August 11, the company called Protocol Labs raised $250 million by selling newly created Filecoin cryptocurrency to investors.
To put it simple words, the investors wired quarter of a billion dollars to a company with only a few employees and no revenue. In return, each investor received a string of computer code.
The Filecoin project is different from the well-known digital currencies like Bitcoin. The Filecoin offering aims to create not only a new virtual currency, but a new marketplace for unused computer memory.
Essentially, Protocol Labs wants to do to computer memory what AirBnB did to apartments: letting other people use the available and unused space. AirBnB created market for strangers to use an empty room in your apartment. The Filecoin wants to help you to rent out the unused memory space on your computer hard drive.
AirBnB “disrupted” the market for hotel rooms. Protocol Labs aims to disrupt the market for computer storage.
The AirBnB analogy is not entirely accurate, since the Filecoin system is more of a B2B play. While it is theoretically possible for any person to “rent out” the unused space on his laptop, the real players in the data storage market are companies that own computer servers with large memory.
Few questions immediately spring to mind about the viability of Protocol Labs’ business model.
First, does not seem to be any shortage of computer memory space. Companies like DropBox, Yandex Disc, Google provide cheap and convenient options for data storage. But perhaps Protocol Labs is thinking ahead. With the amount of data growing rapidly – half of all data in the world was created in the past two years – one can argue that the world might soon run out of cheap data storage.
Second question is why Protocol Labs decided to launch a new currency, instead of using existing currencies, such as BitCoin or Ether. Filecoin’s explanation is that the “mining” of Filecoin will be linked to users’ ability to prove that they have a reliable, safe, retrievable storage space, that requires not only the presence of computer equipment but also good Internet access.
Business model doubt notwithstanding, the Filecoin project has been a runaway success. It is the largest Initial Coin Offering to date. The demand for the Filecoin offering was so high, that the price went all the way to $4.68. In a rather remarkable step, the sale of Filecoins was paused to prevent further market runup. The offering resumed two days later and successfull wrapped up on the 10th of August.
The visionary investors such as Sequoia Capital, Union Square Ventures and Winklevoss Capital who invested $52m in Filecoin a month ago at the price of 75 cents per one Filecoin have already increased their investment by more than 6 times, although they cannot sell their Filecoins during the lockup period.