On October 15, Filecoin, the decentralized file storage protocol pioneered by Protocol Labs, launched to much fanfare. The project had raised over $250 million in an ICO back in 2017 and delayed its launch three years later to ensure regulatory compliance.
However, on its first day of trading, a post on premium Chinese crypto community, DPRating cites a miner source as revealing that millions of Filecoin testnet coins flooded the market via exchanges.
These coins were not supposed to be usable on mainnet and did not form a part of the initial supply that the Filecoin team pledged to release as part of its vesting schedule.
Some testnet coins were given to miners as part of a Github faucet launched in late 2019. These coins were reportedly “worthless” and were only for testing purposes. Also, in the buildup to the mainnet release, the “Filecoin Space Race” handed out 3.66 million FILs testnet coins and 2.8 million FILs respectively to miners in addition to what was claimed from the faucet.
The agreement was that only the reward for the “space race” would be part of the mainnet and follow a 180-day lockup period.
But at the peak of the market rally that followed the Filecoin mainnet launch on October 15, miners realized that Gate.io, one of the exchanges that first announced support for FIL, allowed them to deposit testnet tokens and sell them for other cryptocurrencies (BTC, USDT, ETH).
Miners reportedly turned the discovery into “a harvesting feast,” dumping millions of testnet coins on exchanges. Simultaneously, the price of FIL fluctuated in tandem as the selling continued, and retail investors wondered what was happening to the price of a promising project.
Miners made quick profits ranging from hundreds of millions of dollars to a few hundred thousand dollars from selling their testnet coins.
In the end all the test coins including ones from the space race. From large miners reportedly making over $100 million to even smaller technicians & miners clearing $200,000 in profits from because of “officially” distributed $fil coins
— ฿itcoin (@CryptoChrisG) October 20, 2020
At the time of writing, Filecoin (FIL) was trading for $32 even though it had reached as high as $208 within the first 24 hours after its initial distribution.
Meanwhile, the matter was further aggravated with miners discovering that they had sold more tokens than they need to fulfill the “Initial Pledge Collateral” amount they needed to continue mining on the Filecoin mainnet.
Rather than repurchase tokens from the now-existing secondary market, these miners who evidently controlled a large majority of Filecoin’s decentralized storage space turned off their mining machines. It pressured the Filecoin team to unlock in advance 25% of earned mining rewards.
ST Cloud CEO Chuhang Lai said in an October 15 report by 8btc:
“All the miners have been off since the mainnet went live, this is not some sort of protest, but we have to shut them down because we really don’t have the tokens as collateral to mine.”
Based on the vesting schedule, these rewards should be subject to a 180-day lockup. But the Filecoin team yielded to the pressure from miners and unlocked 25% of mining rewards (roughly 1.5 million FIL) in advance.
Filecoin’s Floating Supply Greatly Exceeds Quoted Numbers
The Filecoin network has issued 1,931,302.71 FIL in block rewards to date, according to data from Filscan explorer. The team had released an additional 1.5 million FIL sold as part of its “market value management” strategy, which wasn’t initially stated in the issuance schedule.
Still, that would put the total circulating supply of FIL tokens roughly 3.5 million FIL tokens and not the over 17/6 million coins being reported by crypto tracking sites, CoinMarketCap and Coingecko.
Meanwhile, the Filecoin team is yet to issue a statement in response to the disparity in the coin’s circulating supply and hasn’t responded to our request for comments at press time.
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