Is Filecoin Safe?

Last Updated October 25th 2021
6 Min Read

Is Filecoin Safe? Since Filecoin is a decentralized storage provider, its security and safety mechanisms are peer-to-peer. Your files are split up and stored around the world on different computers. This means that you don't rely on one company to hold your documents; instead, nodes all over the world hold fragments of your data.

Let's say you have 10,000 photos of your dog that are all 100 MB in size. You could upload these files to the Filecoin network and pay a small amount for storage.

Filecoins would be transferred from your wallet to other nodes on the blockchain through the use of smart contracts. Your file fragments would then be split up and encrypted, with each file fragment assigned a unique ID. These fragments could then be saved all over the world depending on where in the network is most cost-efficient for storage.

As an example, let's assume that your files were being stored by one user in Singapore and another user in South Africa. At some point in time, Filecoin's price would be higher for storage in Singapore. You may then decide to relocate your data fragments to a node that is more cost-efficient or closer to you.

In essence, this means that your files are stored all over the world depending on which nodes have the lowest prices and fast speeds at any given time. In turn, this makes Filecoin more decentralized than competitors such as Dropbox and Google Drive.

This also ensures a certain level of security because many people are helping you store your data. If one node fails, your data is still safe because other nodes have fragments of it.

However, decentralized storage comes at the cost of speed. It could take a few minutes for files to be transferred from one node to another, depending on which nodes they are being stored at. This may not always be an issue but could affect those who need fast performance from their storage.

In addition to this, decentralized storage is safer against data breaches and attacks because all of the nodes store a piece of your file fragment instead of one company. It's much easier for a hacker to gain access to a single point of storage like Dropbox rather than trying to access thousands of files from different unknown sources. 

Security Features to Consider Before Buying Filecoin

Filecoin is used by people who are looking for decentralized storage. Because of that, the main security features are decentralization and file splitting/fragmentation. These help ensure that files are safe because there's no single point of failure in the network. The network also helps protect against breaches.

On top of that, there are other features you should consider when investing or even storing your information with Filecoin. 

These include:

  • Filecoin's cryptographic hashing. This ensures that your data is encrypted and cannot be accessed by anyone else. It also prevents users from moving files to different nodes and storing the same file fragments at multiple points in the network simultaneously.
  • Several layers of encryption. Because your data is split up, it makes it harder for hackers to access your files. Each file is split up into many different pieces, all of which are encrypted separately.
  • Coin mixing. Because Filecoin uses a proof-of-replication consensus algorithm, it is particularly vulnerable to Sybil attacks when node identities are easily faked. The coin mixing feature helps prevent this by ensuring that nodes have a harder time faking their identity.
  • Filecoin mining. Because the network is decentralized, there's no one to control its future. Mining only becomes more difficult as more and more miners enter to compete for rewards. This helps keep the network decentralised and ensures that Filecoin can't be controlled by a single group in the future.

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Risks Associated With Filecoin Investment

The main risk associated with investing or using Filecoin is its use of IPFS technology. IPFS stands for InterPlanetary File System and is used by Protocol Labs to maintain the Filecoin project. IPFS allows anyone to create a virtual file system that can be accessed across the world without needing a central server. While this has many benefits, it also has drawbacks.

For example, just like Filecoin doesn't have control over its network, IPFS is decentralized as well. This means that there's no one responsible for maintaining the system. If anything goes wrong with the configuration of nodes or access to files, there isn't much anyone can do about it because they aren't people who control the network.

In addition to that, IPFS can't be accessed by those without a virtual private network (VPN). Although Filecoin is working on changing this feature, it could still pose a security risk for those looking to use Filecoin's services.

There are also other risks associated with Filecoin as an investment. The main one is volatility. As a cryptocurrency, Filecoin is vulnerable to price fluctuations, and it's uncertain how the market will treat it. 

Other risks include:

  • An already saturated and competitive crypto space with heavy competition
  • Copycat cryptocurrencies that could cannibalize the coin's value before it gains traction within its niche market
  • The possibility of IPFS issues leading to the loss of user data
  • Low file transfer speeds on their blockchain network can make it difficult for Filecoin to scale into a mainstream cryptocurrency

The Best Way To Keep Filecoin Safe

If you bought some Filecoin tokens and looking for the best way to keep them safe, we recommend that you consider several things:-

  • Where you store your wallet. A lot of cryptocurrency users recommend storing their virtual wallets in a cold storage wallet, such as a hardware device or USB drive that is not connected to the internet.
  • Where you buy your Filecoins from.  Although there are several exchanges that allow you to buy Filecoin, some are more reputable than others. That's why it's always a good idea to research all of the risks associated with an exchange before buying any cryptocurrency through them.
  • How you store your Filecoin. Because Filecoin is a decentralized storage system, it does not have control over the security of its users' data. This means that you need to be very vigilant about how you store your own data. One great way is to try encrypting it before storing it on your hard drive.

If you are going to store your coins in an off-exchange wallet, you should choose one that is well-reviewed and provides secure storage protocols. In this case, we recommend a hardware wallet such as Nano S.

Check Out: Filecoin Price Predictions

Conclusion - Is Filecoin Safe?

Filecoin definitely has its issues when it comes to safety. Although the team behind the project seems dedicated to resolving these problems, there are still quite a few risks associated with using the service or investing in the FIL coin. 

The project is a great idea, but it isn't perfect. One of its main drawbacks is the lack of features that are aimed to make it more accessible for those who aren't already avid users of cryptocurrencies. If you're looking for a secure storage system, there are better options out there. But if you want an investment opportunity that is still in its infancy but could potentially be huge, Filecoin might be the coin for you.

Otherwise, don't forget to do your own research and consult with a financial professional before making any large investments.

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.