Filecoin Miners Go On Strike One Day After Mainnet Launch
Filecoin, a decentralized storage network launched by Protocol Labs, has seen a lot of hype lately, however during the last few weeks, the project has been criticized a great deal as well. And just one day after its highly anticipated Miannet launch on October 15, the majority of Filecoin miners have gone on strike.
Five of Filecoin's largest miners switched off their machines to protest the project’s unfairness. Zhihu Cloud, one of the top five Filecoin miners who owns more than 8,000 InterPlanetary File System (IPFS) mining machines had only 276 mining machines running on Saturday. The other four miners have reportedly generated even less storage mining power.
The main reason behind this uprising is that the miners have to actually buy $FIL in order to mine $FIL. The miners are required to venture a large amount of FIL tokens as “Initial Pledge Collateral” to start their mining operations, and apparently, this economic model is not working out for them - it's conflicting and bringing no profit.
The chairman of the firm Space Cloud, Lai Chuhang dwelled on how the Filecoin economic model is inefficient and noted that the public opinion might divide:
“If this situation continues <..> miners will have to buy coins at high prices in the secondary market. Obviously, it’s not worth it. In the current situation, community consensus may split, and the project may be worrying.”
There are two possible ways of getting more tokens but neither of them seems to be acceptable to miners. The first option would be to earn token rewards and use them as collateral but the trouble is that Filecoin issues the rewards only over the course of six months after building a block. And as a result, the miners get very few tokens, to begin with.
Miners could also buy FIL tokens from exchanges, which would be a pretty costly and risky move since there might be a hefty transaction fee as to the common belief FIL is currently rather overvalued. On its opening day, the FIL token's price was soaring to $100 before settling down to almost $40, leaving the investors arguing about it being wildly overpriced.
In response to the miners' discontent, Filecoin will be releasing 25% token rewards in advance once a miner builds a block on the blockchain.