If You Must Buy a Web 3.0 Crypto, Put Filecoin on Your Radar

• While the blockchain has been one of the most remarkable innovations in recent memory, the influx of cryptocurrencies makes finding profitable ones difficult.
• Given the massive interest toward Web 3.0 applications, cryptocurrencies tied to the movement might make sense in the speculative portion of your portfolio.
• Although full of potential, investors must realize that virtual currencies are incredibly risky and therefore warrant considerable due diligence.

Back a decade ago, the concept of the blockchain and its associated cryptocurrency offshoot represented a profound though niche segment. But thanks to a combination of advancements in connectivity technologies and an incentive-driven economic architecture, cryptocurrencies eventually became a mainstream institution, with several Wall Street firms now backing its development and broader distribution.

Still, a case can be made that the sector has jumped the shark. While the total market capitalization of all cryptos stands at time of writing at nearly $1.8 trillion, most of this valuation haul is attributed to a handful of digital assets. Of course, the lesser-known cryptos offer a higher reward potential than mainstream coins and tokens. However, with over 19,000 options available, it’s extraordinarily difficult to sift through winners and losers.

No matter what, prospective crypto investors must practice extreme caution when engaging this volatile arena, making sure to not spend more than they can afford to lose. Nevertheless, if you’ve arrived at a point where you have some speculation funds to redirect, decentralized storage project Filecoin (FIL) could be a worthwhile opportunity.

From Web 1.0 to Web 3.0

To truly understand the potentially bullish implications of Filecoin, prospective buyers must have a basic framework of the evolution of internet connectivity. As you know, one of the most profound innovations in human history was the development of the internet. No longer were computers tied to the maximum boundaries defined by their physical capacity. Instead, machines could now connect with one another, sharing data across a digital network.

Loosely speaking, this period is called Web 1.0, the foundation of connectivity. From the modern perspective, the data that could be shared along with the time it would take to send said data would be deemed almost nugatory. But in truth, it was a radical paradigm shift as it marked the first time that “tangible” information could be distributed digitally rather than physically (i.e. an e-book versus a physical book sent via post mail).

Still, the setback regarding Web 1.0 -- aside from slow upload/download times and other administrative frictions -- was how scattered it was. In the early days, the internet was awfully disorganized. Soon, technology firms recognized the power of organization (think assigning names to streets and numbering expressways) and set out to refine the digital information landscape. The result was entire connected ecosystems that sparked unprecedented convenience and productivity.

This era, the current cycle, is Web 2.0. But a critical problem eventually became apparent. Tech giants like Alphabet (GOOG, GOOGL), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT) and others formed an elitist hegemony over connectivity platforms. In turn, this level of consolidated control sparked issues of online censorship and privacy violations, matters which most Americans are very concerned about.

And that leads us to Web 3.0, advanced internet connectivity but where the power structure is decentralized.

Filecoin and the Decentralization of Data Storage

While crypto advocates may argue that the blockchain’s greatest contribution to society is the introduction of decentralized currencies, it may actually be the decentralization of commerce that stands the test of time. What many crypto investors may not realize is that decentralized currencies were quite common prior to the establishment of a national currency.

Although debates are plentiful, the progression of human societies generally provides consensus that people prefer stability in their monetary systems. Virtual currencies, as exciting as they may be, are anything but stable.

But the blockchain’s contribution of decentralization and a public, distributed consensus-driven transactional mechanism is ideal for enhancing the footprint of Web 3.0 applications. Filecoin is particularly compelling because it focuses on one important component: decentralized data storage.

Under the current centralized paradigm, internet users that wish to store their data on a cloud network must usually seek out a major tech firm like Amazon or Alphabet. Because big tech essentially monopolizes the cloud, it can charge a hefty fee for the service. In addition, only big tech financially benefits from this consumer-provider relationship.

With Filecoin, individual users can contribute space they’re not using and donate it to the underlying network. Through this action, the public serves the public, while contributors receive reward tokens for their storage space. Better yet, the native security architecture of the blockchain ensures that the data is actually stored safely while maintaining transparency and anonymity.

In other words, Web 3.0 blockchains are all about cutting out the vulturous middleman.

Due Diligence is Vital

Although Filecoin commands an incredibly powerful narrative, interested investors must realize that narratives alone don’t make an idea profitable. The fundamentals still matter. In this case, Filecoin proponents must attract enough people to the network to make it viable.

Indeed, the market performance of FIL suggests that most investors don’t see the return potential materializing anytime soon. So far on a year-to-date basis, Filecoin has lost almost half its market value. Primarily, the challenge is drawing enough interest to the network: decentralized data storage doesn’t mean much if no one is willing to contribute space to the community.

Still, as people across the globe tire of big tech’s hegemony over connected platforms, Filecoin may attract the numbers it needs. Certainly, it’s a name to consider if you have some loose change dangling in your pocket.