Filecoin comes in and is among the most promising platforms for that purpose (Web3). Designed specifically to change how data is stored, Filecoin is the platform which stores, retrieves and manages data in a decentralized manner.

But for those of you wondering how to mine Filecoin — or, to put it another way, how to become a storage provider — you’re not alone. In this guide, we’ll take a closer look at what Filecoin mining is exactly, what you need to participate, and whether or not it’s a profitable venture in today’s market.

What Is Filecoin?

Filecoin is an open-source, decentralized file storage network; users are paid to host other people’s data on their unused hard drive space. Rather than trust data to a centralized service such as AWS or Google Cloud, anyone will be able to store it across a distributed network, powering a new generation of distributed applications.

Users pay in FIL tokens for storage and retrieval — and, as of Wednesday, “miners” (the new term for them is storage providers) receive rewards in kind for adding capacity commitments and adhering to data integrity.

Filecoin is a fundamental building block in Web3, in particular for applications that are managing NFTs, media archives, or any secure storage needs.

Filecoin Mining: It’s Not What You Think

And while many cryptocurrencies have adopted the language of “mining” to describe how new coins are created and circulated, Filecoin has steered clear. Rather, it uses the terms service provider (referred to as: storage provider (SP) or retrieval provider).

Storage hosts pledge disk resources to store user data and produce cryptographic proofs as proof of their service. In exchange, they are rewarded with FIL tokens — the native cryptocurrency of Filecoin.

Retrieval providers, meanwhile, assist with delivering data when it is needed. Both are necessary to sustain the network and to receive rewards.

Can Anyone Mine Filecoin?

The short answer? No — not easily. It is a bit more complicated to mine Filecoin (become a storage provider) than it is to mine other coins such as Monero or Litecoin.

It needs high-end hardware, lots of storage space and deep technical skills. Even far smaller setups consume many times more power than the vast majority of crypto mining operations.

• CPU: 8-core (or more) processor (preferably with Intel SHA extensions)

• RAM: 256 GB

• Graph Card: NVIDIA with at least 11GB VRAM

• Disk: 2TB NVMe SSD

• Storage Commitment: 10TiB disk space or more

• Internet: Stable, high-bandwidth connection

• Wallet: A safe Filecoin wallet (Ideally a hardware one such as Ledger)

These specs make Filecoin inaccessible to casual users. In addition, FIL is used as a stake when participating — an added financial barrier to entry.

Filecoin Mining Alternatives: Give Filecoin Station a Try

If you’re not willing to dish out for your own enterprise-grade mining operation, there’s one option that could still be beneficial.

Filecoin Station is a desktop application that empowers any user to contribute to the Filecoin network by lending out their idle computer resources. You can earn a little bit of FIL token by contributing your spare storage, bandwidth and CPU cycles.

While it won’t make you rich, Filecoin Station is an easy (and crypto-passive-income–y) way to support decentralization — no server farm in your garage required.

Is Filecoin Mining Profitable?

The specific profitability of the contract will depend on a variety of factors:

• Seed capital for hardware, and minimum funds to be collateralized

• Electricity and maintenance costs

• Market price of FIL tokens

• How well you are able to run and maximize your setup

• Competition from large-scale providers

Return on investment is difficult to predict. Because the price of FIL varies, it’s very difficult to calculate ROI accurately. There are Filecoin profitability calculators for you to use online, but they can’t even cover all the risks.

You’ll be at best breaking even and at worst losing money unless you scale well and have low-cost infrastructure.

Several storage companies try to raise capital from outside investors to pay for these high upfront expenses, which says quite a bit about the barrier to entry and financial risk.

The Bottom Line: Should You Mine Filecoin?

If you’re a techie with deep pockets looking to make a long-term commitment, Filecoin mining might be worth investigating. But for everyone else, it’s a high-risk, high-cost gamble.

Fortunately, you don’t need to mine Filecoin to profit off its growth. Purchasing and holding FIL tokens will provide exposure to the success of the ecosystem without the operational burden.

Filecoin is still one of the hottest projects in decentralized storage. Whether you want to run nodes or just use Filecoin Station, there are many ways to get involved with this next generation of internet infrastructure.