[anchpop]

That is actually the intent of filecoin. In perfect competition, which is the ideal state for a commodity, there is no economic profit. The reason Amazon and other companies are able to make a profit selling cloud storage is because there is not yet perfect competition.

Right now if I wanted to compete with Amazon, I could buy 2 or 3 petabytes of storage space and some bandwidth. But nobody would trust me not to lose their data. This is the differentiation that makes cloud storage less of a commodity than it could be. The goal with filecoin is to make it so you don't have to trust me, just some general guarantees about the filecoin network. If amazon for some reason was selling storage on this network, I could compete with them on equal footing (and whoever sold it more cheaply would win).

Many commodities are in close-to-perfect competition. For instance, I don't care if grain comes from England or France, just that it's cheap. While it is very hard to make an economic profit selling grain, many people do farm grain and make enough money to support themselves (The money you pay your workers to survive is one of the costs of producing grain. That's true even if the only worker is you)

If you could make a profit by running a filecoin node on a VPS, everyone would do that. By competing with each other you'd all bring the price down and down until it was no longer more profitable than selling any other commodity (and maybe even lower). So you're right to not expect to be able to do that.

[rglullis]

Your arguments do not follow:

> which is the ideal state for a commodity, there is no economic profit.

No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded)

> While it is very hard to make an economic profit selling grain, many people do farm grain and many enough money.

The analogy here would be to get people to (a) "farm" disks (and electricity/internet) and (b) with some profit to justify their work. (a) is impossible (except for freeloaders) and you agree with me that (b) seems to be unlikely.

So the question is: who would be interested in taking the supply side of the filecoin network, when there is no profit to be made?

[anchpop]

> Your arguments do not follow:

> > which is the ideal state for a commodity, there is no economic profit.

> No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded)

You cut off the first half of my sentence. The full sentence was:

> In perfect competition, which is the ideal state for a commodity, there is no economic profit.

Oil is not in perfect competition because of OPEC, a gigantic state-sanctioned cartel. Since there's imperfect competition, there can be economic profit.

> who would be interested in taking the supply side of the filecoin network, when there is no profit to be made?

If we assume the filecoin network is technically able to do what it's supposed to, there will likely be profit to be made. Just not economic profit. Economic profit is different from accounting profit because economic profit takes into account opportunity cost.

In the real world many people, such as grain farmers, do seem to be interested in taking the supply side of a transaction even when their economic profit is 0 (or negative). I don't see why filecoin would be any different.

[rglullis]

I am sorry. Just like I am missing how someone would work on a farm without any expectation of return on their investment, I fail to see how "there is profit to be made", however you want to call it.

Also, with farming at least there is the notion of resource constraints. To be a farmer one needs to have access to land and dedicate some time to actually work on it.

With storage, unless the hard disk manufacturers start holding their production and use it to offer storage directly, what is the resource that other people can't have?

What would stop anyone to see that Filecoin network bids of (say) $1/TB-month and think "oh, I can buy some disks and offer $0.95/TB-month, and I will get my money back in 3 months", only to be outbid by someone who thinks they can offer $0.90/TB-month and recoup costs in six-months", until we get to the point where the time to break-even gets longer than the lifetime of the disks...

[scoopertrooper]

> No. A commodity is simply any kind of good that is considered equivalent no matter who made it. Oil is a commodity, there is plenty of competition and there is still plenty of profit to be made (current crisis excluded)

You could hardly say a market dominated by a giant state-sanctioned cartel was a good example of a commodity market in the state of perfect competition.

> So the question is: who would be interested in taking the supply side of the filecoin network, when there is no profit to be made?

There would likely be some short term economic profits at the beginning, which would attract market entrants. The economic profit would tend to zero over time, but keep in mind economic profit as a concept incorporates the notion of the entrepreneur paying themselves a competitive wage for their time.

[rglullis]

> giant state-sanctioned cartel...

Point still stands. All else being equal, oil from Saudi Arabia is the same as the oil from Canada or Denmark. If you don't want to use oil as an example, use coffee, milk, chicken meat, soy, cotton, oranges, electricity, potable water...

> There would likely be some short term economic profits at the beginning, which would attract market entrants.

The first market entrants are the ones selling extra capacity they have. For those that already have sunk costs of the disks, sure, they can make a profit on this. My point is that once that capacity is gone and there is more demand for data, people will have to actually go and buy disks and let them run 24/7, and this would cost more per GB stored than they will be able to sell.

[jhoechtl]

The point is perfect competition, highlight on perfect. In oil business there are profits because competition is not perfect. Note that perfect here is rather a theoretical, economic term. In reality, market regulations and peoples socio-economic attitutes prevent a perfect competition.

The mentioned missing trust could be alleviated by IPFS becoming a widely trusted, distributed, unstoppable service.

[rglullis]

Are we talking past one another?

My point is exactly that if Filecoin does get to be a place that gets "perfect competition" as you say, then there is no profit to be made. If there is no profit to be made, what is the economic incentive to spend on disks/internet/computers and be a storage seller?

Before you say "there is a market for those with excess capacity", answer me this: if the market is focused on those with excess capacity, what mechanisms are in place this "perfect competition" to remove all chance of profit and get the price of excess capacity to reach basically zero?

I get IPFS, I think. I do believe that it technically it makes sense. What I don't get is Filecoin.

[Nursie]

That's the economic flaw in all of this - Amazon have economies of scale and access to cheap power and network connectivity and that means smaller competitors will be locked out of the market.

You're not going to be running a node on your spare capacity that brings in more than your costs, in fact unless you're a datacentre operator, you're going to be making a loss.

In the end it favours big centralised services, and IPFS (if it ever takes off) just becomes a rival API to S3.

[zozbot234]

Cryptocoin miners' profit is largely based on "access to cheap power and network connectivity", and many of them run fairly large-scale operations but nowhere near the same scale as Amazon. No reason why a "file coin" should be any different.

[Nursie]

But they do centralise. And they do quickly go out of profitability for those with some spare compute power at home, into the hands of those with cheap power and specialised equipment who can undercut and outcompete them.

You are right - there is no reason this would be different. That specialised equipment is storage space here.

[rglullis]

That is missing the point. No one doubts that it is possible to bring down the costs of storage and its infrastructure. The point is that no matter how low these costs are all nodes are driven to undercut each other until their profitability is zero.

[ric2b]

There's a lot of spare capacity in personal devices, getting _anything_ out of that capacity is nice and means you'll have people gladly undercutting Amazon and friends. Maybe limited and not at the same level of availability but still competition.

[rglullis]

> getting _anything_ out of that capacity is nice

Ok, now go tell that to the ones that put 257 million USD on the Filecoin ICO and are expecting profits on a growing network!

> undercutting Amazon and friends.

That is so short-sighted. Amazon storage is not priced only due to the cost of storage. If it were, Wasabi would be stealing all of their customers given they charge "only" $6/TB-month, and I could go steal all of their customers because I have a cluster of Minio Servers that cost me $3.50/TB-month.

People are paying Amazon and the other major players a premium is not due to lack of competition or collusion between them or because they are price-sensitive. If they are (like I am), they would figure out how to setup Minio/Ceph and run their own servers.