Investing in GLIF: Efficient Capital Markets for the Future of Decentralized Data Storage
Author: William Starr
Co-Author and Review: Parker Jay-Pachirat, Sean Lippel
DeFi @ FinTech Collective. We are a dedicated, crypto-native team of investors at FinTech Collective. Our DeFi Funds are stage-agnostic, investing in both equity & tokens — from white paper to liquid markets. We support our portfolio through fundamental research, on-chain governance, code review, product & token design, liquidity mining, & more…
Introduction: Investing in GLIF
We are excited to announce our investment in GLIF, a non-custodial, smart-contract enabled capital markets protocol built for the Filecoin network. GLIF has created a simple and flexible way for data storage providers to finance their infrastructure costs on Filecoin, while allowing holders of Filecoin’s native token (FIL) to earn native yield on their holdings.
We believe GLIF will quickly expand over the coming years to become the de-facto financial layer of Filecoin.
Filecoin: Redefining Decentralized Storage
To understand GLIF, one must first understand Filecoin. Below is a quick primer. (Familiar with Filecoin? Skip ahead to ‘The Current Market for Storage Providers’).
A. What is Filecoin? The TLDR:
- Filecoin is a decentralized storage network running on a global, open market. It aims to act as the foundation for data-intensive Web3 services through verifiable storage, content retrieval, compute, and programmable apps.
- Filecoin, a “peer-to-peer version of Amazon S3”, ensures cryptographically guaranteed data availability and consistent storage verification.
B. Why is Filecoin needed?
The Problem:
The growth of the Internet and artificial intelligence has created the need for vast amounts of data storage. Yet, traditional cloud data solutions centralize control, raising privacy and security concerns for users of these services. The majority of global consumers and enterprises rely on centralized hosted services today, losing varying amounts of control of their data and its integrity in the process.
The Solution: Filecoin!
Filecoin addresses these challenges by distributing data across a global network of ‘Storage Providers’, ensuring no single entity controls the network’s data. This decentralization enhances security and privacy, fostering a competitive storage market to lower costs.
C. How does Filecoin work?
Using a dynamic supply-and-demand pricing model, Filecoin enables data storage deals priced in $FIL, Filecoin’s native token. It aims to create a decentralized storage market by encouraging global contribution of unused storage space. This contrasts with traditional, centralized cloud storage such as Google Storage, Amazon S3, or Apple’s iCloud.
Note: People who contribute their storage space to the Filecoin network are known as “Storage Providers.”
D. Who benefits from Filecoin?
The Filecoin storage network is ideal for organizations, institutions, government bodies, and enterprises. Why? These actors manage large amounts of sensitive data (such as personal identity data, medical data, and scientific research). There has even been a strong movement in the AI/LLM community to create decentralized warehouses for the model data.
Many institutions, including the City of NY, USC Shoah Foundation, OpenSea, SETI Institute, and Solana, already use Filecoin for data storage.
The Current Market for Filecoin Data Storage
Filecoin’s storage market is growing, with contributions from diverse participants. ‘Storage Providers’ range from individual hobbyists to professional, enterprise-grade data centers. Filecoin rewards storage providers in FIL. Despite the increasing number of storage deals being closed on Filecoin each year, there are still untapped participants. Providing storage on Filecoin has capital-intensive barriers to entry, including hardware costs and technical knowledge.
Several additional problems exist for both buyers of data storage (the demand side) and storage providers (the supply side):
- Storage providers need a large amount of upfront FIL for pledge collateral to provide storage. There is no straightforward way to borrow FIL from multiple sources without fracturing liquidity and complicating operations.
- Storage providers do not have an adequate way to hedge against the price fluctuations of FIL, which is also the means in which they are compensated. As with any business operation, uncertain costs and revenues are not constructive to financial forecasting.
- The average holder of Filecoin has no simple, easy, and secure way to lend their FIL and earn native yield. No smart contract enabled DeFi protocols have been built to-date by experienced teams with deep knowledge of the intracies of the Filecoin ecosystem.
- The Filecoin ecosystem struggles to incentivize parallel objectives including data retrieval and green energy mining.
Enter: GLIF Pools
GLIF addresses network inefficiencies inherent to Filecoin and resolves many of the pain points storage providers face today. GLIF pools are:
- Scalable: Enables the deployment of hundreds of new multiple capital markets on Filecoin.
- Customizable: GLIF modular technology stack enables fully customizable Filecoin markets to be built on top of it. GLIF’s purpose built oracle system monitors storage provider data in real time.
- Interoperable: GLIF enables storage providers to borrow from multiple pools simultaneously without fracturing liquidity. Users can also deploy into one or more pools of their choice.
- Composable: Providers can increase their borrowing power over time and leverage GLIF’s composability, allowing them to build new business models on top of the protocol.
The Launch of the FVM: Why The Time For GLIF Is Now
GLIF is not just another protocol in the DeFi space; it’s a pioneering liquid leasing platform designed for the Filecoin network. With the recent Filecoin Virtual Machine (FVM) launch, the network has embraced smart contract capabilities, opening new avenues for decentralized finance. GLIF leverages this innovation, enabling a non-custodial DeFi ecosystem that caters specifically to the needs of the Filecoin community.
The protocol’s unique approach to liquid leasing, inspired by the success of liquid staking protocols in other ecosystems such as Lido on Ethereum, allows Filecoin ‘Storage Providers’ to borrow against their collateral. This model boosts capital efficiency and democratizes access to FIL, the native token of Filecoin, for a broader range of participants.
GLIF’s Leading Position in the Market: A Look at the Numbers
GLIF’s impact on the Filecoin ecosystem is evident through its impressive early traction:
- Filecoin liquid leasing market has 3x’d since July 2023 (in absolute / $FIL terms).
- GLIF, now 2x larger than its closest competitor, stands out as the market leader, capturing over 58% of FIL market share in smart contract based Total Value Locked (‘TVL’).
- Over 10% of the total Filecoin Storage Mining power is pledged through GLIF.
- GLIF boasts more than 1,500 unique depositors, highlighting its widespread acceptance and trust within the community.
- With 190 unique miners pledged to the protocol, GLIF demonstrates a robust and growing network of participants benefiting from its services.
These statistics highlight GLIF’s successful launch and adoption, demonstrating strong early signs of product-market fit. The numbers validate our thesis that GLIF efficiently fills a market need with superior operational excellence and insight. This early success suggests GLIF’s scalability potential and future role in boosting Filecoin usage.
Why We Are Excited About GLIF
Our decision to invest in GLIF stems from a confluence of factors:
- ‘0-to-1’ DeFi Innovation: GLIF is not marginal incrementalism. The protocol represents a leap in DeFi innovation on Filecoin, providing a critical piece to the puzzle of capital efficiency and liquidity within the Filecoin ecosystem.
- ‘The Team, The Team, The Team’: Cue Bo Schembechler circa 1983, the founding team of GLIF is first-class, and the most talented team we have encountered building on Filecoin. Moreover, they have a proven track record together of building mission critical applications and tooling for Filecoin since 2018 including wallets, explorers, and multisigs.
- Technical Excellence: The GLIF team’s ability to navigate the complexities of Filecoin and create a bespoke solution tailored to its unique challenges reflects a level of technical expertise and innovation prowess. The protocol has been audited extensively via formal review at Consensenys diligence, as well as Sherlock. The team has financial and distribution backing from both institutional venture investors and Protocol Labs / Filecoin Foundation.
- Vision for the Future: GLIF’s extensive product roadmap is ambitious, and is aligned with protocols that look to capitalize on their dominant and trusted positions to launch complementary and adjacent solutions to service their users.
As we look towards the future, our investment in GLIF is not just a testament to our belief in its current value proposition but also an investment in the evolving narrative of DeFi’s role in reshaping the Filecoin network. We are excited to partner with GLIF as they continue to innovate, scale, and contribute to a more inclusive and efficient financial ecosystem.
