How to Stake Filecoin (FIL)
14 Jan 2024 by Syed Waleed 10 min read
How to Stake Filecoin (FIL)

Filecoin ($FIL) is an innovative open-source cloud storage marketplace. With its advanced decentralised storage system serving as its main product, those interested can also explore how to stake Filecoin as a means of passive income.

As an introduction to Filecoin, the project utilises blockchain tech to offer a world leading decentralised data storage solution that’s built around cryptographic proofs, security, and immutability. Here, users can also earn a passive income by renting out unused storage to network participants.

As is the premise of this article, generating income via Filecoin extends to staking - wherein exploring the most lucrative FIL staking options can provide users with valuable insights into optimising their crypto profits.

This comprehensive guide will address these inquiries, offering a detailed walkthrough on how to stake Filecoin.

The Concept of Staking Filecoin

Implemented in digital assets operating on the Proof of Stake (PoS) consensus mechanism, staking involves fortifying a network's security. This process entails depositing the native asset of the respective blockchain into a smart contract and locking it for a predetermined duration.

Filecoin staking presents a distinct approach from the usual proceedings, as it entails a dual consensus mechanism that encompasses Proof of Replication (PoRep) and Proof of Spacetime (PoSt).

Here, PoRep ensures data duplication to a unique location, while PoSt validates storage providers' commitment to maintaining the data's availability and security over time.

Consequently, staking FIL tokens directly is not feasible due to the unique architecture of the Filecoin network, however several third-party solutions act as intermediaries to further allow Filecoin staking on their platforms.

Exploring the Mechanics: Unravelling the Process of Filecoin Staking

In a nutshell, there are two primary avenues for generating passive income through Filecoin: engaging in Filecoin storage mining, and depositing FIL into diverse earning products like cryptocurrency savings accounts.

Further insights into both of these approaches will be provided below.

Storage Mining

Filecoin deviates from conventional staking methods. And while the project also incorporates mining, it operates distinctively from the conventional approach seen in Bitcoin ($BTC) mining.

To gain deeper insights, let's initially examine the workings of the platform itself.

Consider Filecoin as the digital storage counterpart to Airbnb. Should you have unused space on your laptop or mobile device, the Filecoin platform allows you to lease it to another user, earning FIL coins in return.

In summary, the procedure unfolds as follows.

Clients needing storage initiate the process by placing orders on the storage marketplace, specifying the desired storage amount and the price they are willing to pay. Upon agreement between clients and storage miners, hashed data is transferred to the miners. The storage miners then store this data on their disks and furnish data owners with the private keys to access their files. 

To ensure the security of the stored files, storage providers are required to deposit FIL coins, facing the risk of losing the deposit if they cannot verify the data storage. Typically, multiple storage providers safeguard clients' files for enhanced security.

Clients can retrieve their files from the Retrievable Market at no cost, subject to an agreement with the receiving miners. This intricate process ensures a secure and efficient ecosystem for storage transactions on the platform.

This methodology allows for generating passive income within the system through various means (whilst also allowing clients to gain access to much-needed data storage).

Filecoin Earning Products

Centralised exchanges provide standard investment products allowing users to deposit or ‘stake’ Filecoin. Examples of these products include:

  • Binance Earn

  • KuCoin Earn

  • OKX Simple Earn

Participating in each of these offerings involves acquiring Filecoin on the exchange and committing them in order to reap returns. Exchanges typically generate these returns by loaning out the tokens you deposit, charging interest to borrowers.

Options may include opting for a flexible savings account or engaging in a fixed-term investment product, necessitating the locking up of your FIL for a predetermined duration.

Opting for independent mining allows you to take on the role of a storage provider in the Filecoin network, earning rewards for contributing your storage capacity. Further elaboration on each of these methods will be provided later in this article.

Navigating Filecoin Staking: Key Terminology

Proof of Work (PoW):  This is a popular consensus mechanism used in many cryptocurrencies like Bitcoin for validating transactions. Network participants, also known as miners, solve complex computational problems and add new blocks.

Proof of Replication (PoRep): Filecoin employs an alternative consensus mechanism to fortify its network security. This process plays a pivotal role in confirming that a Storage Provider has genuinely generated and stored a distinctive piece of data.

Proof of Spacetime (PoSt): This process ensures the ongoing validation of a Storage Provider's commitment to preserving the unique piece of data throughout the predetermined period.

Storage Provider (SP): A Filecoin network participant chooses to offer surplus storage space for decentralised rental by other users.

Storage Market: Within the Filecoin network, this serves as the data entry point where Storage Providers (SPs) publish their storage deals on-chain and negotiate terms with their customers.

Retrieval Market: The phrase denotes the stage where Storage Providers (SPs) engage in discussions with their customers to determine the terms for data retrieval. Unlike the Storage Market, negotiations within the Retrieval Market primarily unfold off-chain.

How to Stake Filecoin

Staking Filecoin offers various avenues, each demanding a distinct skill level and initial investment size. This section will provide concise overviews of each of these approaches, offering guidance on where to begin.

Engaging in Filecoin Staking Through Centralised Exchanges - Easy

Opting for Filecoin staking on a centralised exchange (CEX) is currently the most straightforward method to leverage your digital assets effectively.

Centralised exchanges (CEXes) work like regular banks, but come with some risks - such as the possibility of being hacked or going bankrupt. Despite these risks, CEXs offer advantages that can be helpful for people who are new to cryptocurrency.

Becoming Part of a Filecoin Staking Pool - Intermediate

Participating in a Filecoin staking pool eliminates the counterparty risks associated with centralised platforms, as users can stake their coins in a non-custodial manner. However, joining a staking pool can be more intricate, demanding specific skills and knowledge.

Initiating Filecoin staking within a pool necessitates the establishment of your personal wallet. This could be a well-known browser wallet like Metamask or a hardware wallet such as Ledger.

Secondly, overseeing your funds in a non-custodial wallet involves implementing diverse security measures, as the onus of safeguarding your funds rests solely on you. While this may pose a manageable hurdle for tech-savvy individuals, it could challenge those prioritising convenience over self-custody.

Engaging as a Storage Provider on Filecoin - Hard

Another avenue to generate income through Filecoin involves becoming a storage provider. By registering as an SP and offering your storage capacity, you play a vital role in contributing to the decentralised storage network within the Filecoin system.

Exploring Filecoin Staking Platforms

Below, we have listed our pick of the best Filecoin staking services and platforms to help you select the right option.

  1. Filecoin Staking Experience on Binance - Top Choice

Binance stands as the cryptocurrency market's largest trading platform, gauged by the magnitude of its daily trading volume.

Supporting several hundred digital assets, Binance goes beyond by providing an extensive array of trading tools and indicators, catering to the diverse needs of even the most sophisticated traders and investors. 

Additionally, the platform adheres to stringent security standards, incorporating thorough compliance checks and multi-factor authentication features.

What makes it a good fit for beginners is an easy onboarding process. With its peer-to-peer trading tool, you can buy some of the most popular cryptocurrencies from other users located in your region. Moreover, you can pay with fiat through a bank transfer, card deposit, or 100+ other options.

How to Stake Filecoin on Binance

To gain access, create an account on Binance and undergo the necessary document submission for platform verification.

Subsequently, transfer your FIL to your wallet. If you don't possess any, you can acquire some using the ‘Buy Crypto’ tab, or exchange another currency for FIL within the ‘Binance Spot’ exchange.

  1. KuCoin Filecoin Staking: Optimal for Diverse Cryptocurrency Options

CEX KuCoin includes Filecoin staking as part of its earning products.

Offering diverse trading tools for users of all experience levels, the platform simplifies onboarding with a P2P trading tool for buying crypto. However, the payment options are fewer compared to Binance.

Based in the Seychelles, KuCoin lacks a licence for operations in the US. While users can create accounts and access certain features, the absence of regulatory approval raises concerns. In the event of a local regulatory ban on the exchange, the risks of potential fund loss increase significantly.

Incorporated into the ‘KuCoin Earn’ product, Filecoin staking is available alongside several dozens of other cryptocurrencies for users to choose from.

How to Stake Filecoin on KuCoin

Before embarking on Filecoin staking through KuCoin, the initial steps involve registering and transferring FIL from an external wallet to your exchange account. Alternatively, you can deposit fiat currency through the supported methods, exchange it for USDT, and subsequently acquire FIL using this intermediary currency.

  1. OKX Filecoin Staking - Best for Beginners

OKX is a CEX that boasts numerous trading tools, including built-in bots, derivatives, and a copy-trading feature.

Due to regulatory and compliance considerations, the platform is currently inaccessible in the United States. While some users might attempt to employ VPNs and other IT workarounds to circumvent this restriction, such measures may not align with the platform's intended usage.

OKX imposes no commission fees regarding its staking offerings, rendering it a favourable choice for generating passive income through Filecoin staking.

How to Stake Filecoin on OKX

Before delving into Filecoin staking on OKX, complete the sign-up process and ensure there are FIL coins in your account. You can either transfer them from another address, or purchase them using USDT or any other supported asset on the platform.

How to Stake Filecoin - Conclusion

In essence, Filecoin staking offers added returns by holding FIL tokens, but becoming a storage provider demands technical skills. For those wondering how to stake Filecoin more passively, options like centralised exchanges or staking pools present easier alternatives.

While the rewards may not be as substantial, this approach remains a straightforward means of generating passive income. 

And when it comes to the best platform to do it on, Filecoin staking on Binance stands out as the most user-friendly choice.

How to Stake Filecoin - FAQ

Is Filecoin staking profitable?

Engaging in Filecoin staking enables the potential to earn returns ranging from 1% to 9.8% annually. It's important to note, however, that the final earnings are subject to the influence of asset volatility.

What is the required duration for staking Filecoin?

The staking durations vary across different CEXes, ranging from 1 to 3 months. In many instances, there is an option to reinvest your assets once the initial staking period concludes.

Can I sell my staked Filecoin?

Selling your Filecoins is not possible during the staking period, as the tokens are locked within this timeframe. To initiate a sale, it is necessary to unstake them first.

Can I withdraw my staked Filecoin early?

Opting for Flexible APY when engaging in Filecoin staking on a CEX grants you the flexibility to withdraw your earnings at any given moment.

Is staking Filecoin difficult?

Engaging in Filecoin staking via a centralised exchange is relatively straightforward. However, the process becomes significantly more intricate when opting to become a storage provider.

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This article is intended for educational purposes and is not financial advice.