Authors: CryptoEconLab Summary Network Quality Adjusted Power (QAP) dropped below the baseline on Dec 17th, 2023. For QAP to catch back up to the baseline in 1Y, it will require a minimum of $800M of investment into the network, assuming a 5-USD/FIL exchange rate. In the regime where QAP is less than the baseline, the consensus pledge required to onboard power is on a decreasing trajectory, which increases Fil-on-Fil returns (FoFR) and incentivizes storage providers to increase data onboarding. However, if decreasing pledge is combined with low onboarding, this will result in lower locked FIL, which is critical for consensus security. This should be carefully monitored in the upcoming months, and any bottlenecks to onboarding should be removed to enable the network to maximize investment flow that can be driven by the higher Fil-on-Fil returns. Introduction The network’s QAP (Quality Adjusted Power) crossed the network baseline on Dec 17th, 2023. Considering this milestone, we provide a situational report of the Filecoin network in this report. Given the current state, we begin by forecasting what the network state will be in one year. This is done using two methods:

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Summary It has been proposed (https://github.com/filecoin-project/FIPs/discussions/887) to burn the amount of baseline minting rewards that were not minted since RBP remained below baseline. Here we provide two general definitions for how this could be implemented: 1)Reducing the minting rate, so that the asymptotic total minted value is reduced, or 2) abrubtly stopping baseline minting at some finite time. We examine possible unintended negative consequences for both approaches. In case 1) the baseline minting rate is reduced immediately, and there would be immediate economic consequences, particularly we discuss a risk of a downward spiral, where baseline minting rate can quickly diminish. In case 2) there is a risk of a large economic shock at the time when baseline minting suddenly stops. Baseline minting primer Filecoin block rewards are given through a combination of simple minting and baseline minting

Authors: CryptoEconLab Summary FIP-0076 (Direct Data Onboarding/DDO) introduces technical upgrades to the Filecoin network that offer alternative messaging pathways for onboarding deal power that reduce gas. In this note, we assess the cryptoeconomic impacts of DDO, namely the supply statistics. Since DDO frees block space, we identify three relevant cases:Case 1 - There is no increase in onboarding or chain activity to fill emptied block space. Case 2 - There is an increase in onboarding, but not enough to fill block space to the target of 5B gas units. Case 3 - There is an increase in onboarding and chain activity to fill block space to the target. Findings:

Authors: CryptoEconLab Summary The CE impacts of providing QA multipliers to all sector types, termed universal multipliers and discussed in FIP 833 - Reasons and Suggestions for Increasing the Quality Multiplier of Filecoin Networks, are evaluated from various perspectives. Deviations in network KPIs from the status quo are driven by opposing forces: a) increase in Network QAP due to increased multipliers, and b) potential decrease in Network QAP due to increased percentage of CC sectors onboarded. In terms of the multiplier options considered, 5/5/20 has the greatest and most uniform effect, since the increase in multipliers is large enough to dominate plausible changes in onboarding behavior (that were simulated). The 5/5/10 and 2.5/2.5/10 options are more nuanced due to the competing forces. Power and MintingMinting Rates will not change unless FIP 833 spurns additional raw-byte power onboarding to the network. Overall Network QAP changes as a result of the multipliers update. In the 5/5/20 case, QAP BLC is pushed out for all considered cases of Fil+ onboarding rate after network upgrade. For the 5/5/10 and 2.5/2.5/10 options, if the Fil+ rate stays at current levels or drops slightly, QAP BLC is still pushed out. However, if Fil+ rates drop significantly, this brings forward the QAP BLC. Circulating Supply

Authors: {Tom, Vik, Shyam, Kiran} @ CryptoEconLab Summary Filecoin's value proposition derives from its mission to create a decentralized, efficient, and robust foundation for humanity's information. Filecoin Plus is one of two incentive mechanisms that have been part of the network since lift-off to achieve this. Filecoin Plus is not about locking, Proof of Stake, or reducing the absolute power of committed capacity. It was designed and operates as a pragmatic solution to the network's inability to otherwise prove useful storage in a verifiable, trustless, and incentive compatible way. A version of Filecoin Plus is needed because without it, storing data in deals is not the rational choice over committing capacity. In essense, the program ensures self-interest aligns with storing data. Misuse of the datacap program is a critical problem. It undercuts data storage businesses by becoming the primary rational strategy, so it is essential to improve Filecoin Plus for the network to achieve its mission. Potential approaches include:Use an escalating challenger-iteration framework for datacap dispute resolution, similar to optimistic rollups or Truebit. This type of approach would remain aligned with a network that supports a decentralized, efficient, and robust foundation for humanity's information. Increase the friction associated with misuse by making the distribution of datacap conditional upon retrieval tests.

These are some short notes summarising the technical aspects of Drand. They are a synthesis of a collection of several sources (including my own --admittedly limited-- knowledge about randon-number generation), and as such, there could be small inconsistencies and errors here and there, but I write them in any case in the hopes it is useful to understand their project. Introduction Drand is a distributed randomness beacon for distributed systems. There are a few key components of that sentence that are worth exploring in more depth. Why do we need randomness? Randomness is inherent to several fields of science and engineering. A need for randomness shows up: In real life, for loteries, random jury selection, etc. In crypto protocols, such as leader election

Maria Silva and Juan P.M. Cianci, CryptoEconLab, July 2023 The Qredo Network is a decentralized custody platform designed to offer businesses and investors a secure and efficient way to manage digital assets. Qredo is currently going through a transaction phase. In 2021, they launched their token (QRDO), and, since then, they have been working on a set of features to improve its usability and increase decentralization. Concretely, the network aims to evolve across three main axes: A1. Increased decentralization through a Federated Proof-of-Stake consensus system (and, later on, Delegated Proof-of-Stake). A2. Enhanced the role of QRDO as Qredo's utility token. A3. More transparency and community engagement through open governance. Ultimately, their goal is to execute the vision of a truly decentralized custody network and to put the QRDO token at the center of Qredo's product. However, to achieve this vision, Qredo's underlying tokenomics and its native token need to adapt, which is the reason why the Qredo Team partnered with CryptoEconLab to revamp the tokenomics of the Qredo network.

Authors: {Kiran, Tom} @ CryptoEconLab Summary The Filecoin Network contains a mechanism to recover from significant shock to the network power (such as large-scale terminations or network forks). The mechanism works as follows: if a shock event occurs, the network creates strong economic incentives for Storage Providers (SPs) to join the network. While the network creates the conditions to enable recovery, the actual recovery depends on the behavior of external actors, namely SPs. While network power has a path to recovery, the ratio of locked tokens to the circulating supply drops proportional to the amount of power that leaves the network. Exponentially increasing onboarding is needed for the locked-to-circulating supply ratio to recover, and the reduction in locked tokens could present a consensus risk to the network and exchange rate instability. This analysis does not consider other external factors that could lead to alternative (potentially more negative) outcomes. These include overall network sentiment, which could influence SPs’ decision-making beyond the rational approach outlined. Recommended Action Items:Implement procedures allowing SPs to profit from the economically advantageous situation following a network shock before they are necessary. Examples include Network Shortfall to allow onboarding to grow faster than otherwise. Share this knowledge with SPs about the potential upside in a shock scenario to mitigate the impact of negative sentiment following a shock situation. Research updates to pledge functions that alleviate economic pressure on SPs while maintaining network security to reduce the likelihood of shock scenarios.

Authors: {Kiran, Tom} @ CryptoEconLab Summary We evaluate several options discussed in the Motivation for a Scheduled Reduction in the Quality Multiplier of Fil+ Deals and Example Timelines GitHub discussion for sunsetting the Fil+ multiplier. We examine the cryptoeconomic impacts of each option, from the perspective of Network Power, Locked collateral, and FoFR returns. Of the proposed variants to update the Fil+ multiplier, the option where all sectors (regardless of whether they are Deal or CC) are given a 10x QA multiplier offers the most positive benefits to network security and new entrants into the system:From a network perspective, this better supports locked collateral, which is the primary source of consensus security for the network. This policy is also better for new SPs, who would otherwise have no multiplier to dilute costs, compared to current network power which would create minimal incentive for new SPs to join the network. The primary change that any reduction to the FIL+ multiplier would bring, however, is removing the cryptoeconomic structure the network uses to incentivize data storage over disk usage. Utility might grow spontaneously without this, but there is no guarantee, and it may be unlikely at this early stage of the network without the help the Fil+ program gives. Simulations and Analysis

Thing 1 and Thing 2: A Macroeconomic Summary of Network Shortfall {Kiran, Tom, Vik} Introduction The introductory FIP discussion post raised by Alex North isolated two problems that currently face the Filecoin network and economy: The difficulty of Storage Providers (SPs) to source the collateral required for committing storage deals and capacity The growth rate of Filecoin’s circulating supply, as inflows outstrip outflows which may add some uncertainty to SP returns The CryptoNet and CryptoEconLab teams at PL have continued to explore the design space in FIP discussion post #666 - “Storage & Data On-boarding With Reduced Pledge Collateral (“Pledge Shortfall”). While further design and analysis is ongoing, there are two versions of a “pledge shortfall” policy (known as "Thing 1" and "Thing 2" that are concrete enough for wider public feedback. The following document provides a summary of both proposals, as well as a discussion of some key cryptoeconomic considerations and tradeoffs between the two shortfall proposal variants. CEL will continue to provide supporting analysis as public community discussion relevant to shortfall policy progresses.

Sector duration multiplier ‘all sectors’ vs ‘new sectors’ analysis Authors: {Vik, Kiran, Tom} @ CryptoEconLab Summary In the sector duration multiplier (SDM) proposal, an important design choice is to decide whether all sectors (renewals and new onboards) or only new sectors will receive SDM. The choice will impact: Initial pledge per sector onboarded A storage provider’s FIL-denominated ROI Accessibility for deal power compared to committed-capacity power Potential for induced termination incentives

Authors: {Kiran, Vik, Tom} @ CryptoEconLab Summary Using Monte-Carlo methods for forecasting, if current trends in onboarding and renewal rate continue, we expect total minting to approach simple minting on 2026-03-18 (median forecast), with a 90% credible interval between 2024-12-01 and 2028-02-20. This is an expected consequence of Filecoin’s minting design, due to raw-byte power being less than the baseline, and due to exponential decay of simple minting. Using counterfactual scenarios for Raw Byte Onboarding and Renewal Rate trajectories, we observe that as these scale up, the date on which total minting approaches simple minting is extended further into the future. For example:For Raw Byte Onboarding at 35 PiB/day and renewal rates of 55%, total minting approaches simple minting around January of 2027. For onboarding and renewal rates higher than this, total minting remains sufficiently greater than simple minting. For Raw Byte Onboarding at 3PiB/day and Renewal Rates at 5%, total minting approaching simple minting around August of 2024. 1. Introduction In this report, we recap the details of Filecoin’s minting and address the following questions:

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Introduction Filecoin is a decentralized storage network that allows users to rent out their unused storage space to others in exchange for FIL. To ensure smooth network operation, Filecoin uses a fee market that includes a "base fee," the minimum fee required to get a transaction included in a block. The base fee changes dynamically based on demand for block space, which can vary widely over time. The upcoming deployment of the Filecoin Virtual Machine (FVM) is expected to bring new demand for the usage of Filecoin gas, which could be absorbed by scalability solutions. However, different stakeholders in the network have varying utility functions (understood as a mathematical characterization of preference) with respect to the base fee. For instance, users sending small transactions may pay a higher base fee to ensure quick confirmation, while larger transactions may wait for lower fees. Furthermore, other stakeholders in the network will have their own utility fucntions reflecting their own interests; token holders, for example, would in gernal have a utility funcrtion that prefers token burning, while miners could have a utility function that aims at striking a balance between maximizing earnings and maintaining network stability. In this article, we will (1) present mathematical models for demand in FVM, (2) explore the composition of a block and (3) the utility functions of different stakeholders in the Filecoin network as a function of the base fee and demand for gas. By understanding the composition of block as a function of demand can help us understand how will FVM affect the demand for block space. Furthermore, by examining the utility functions of different stakeholders in the Filecoin network, we can gain a deeper understanding of their interactions and their effects on network performance. This knowledge is crucial for designing and operating a decentralized storage network like Filecoin. This first report is intended to (1) formulate the system at hand and (2) provide a qualitative and "first order" understanding of the effects of the (upcoming increase in) demand in the FIlecoin network. We begin by formulating the governing equations of demand based on a series of mild assumptions. The reader uninterested with these mathematical details can freely skip the next section.

Project Background The recent surge in blockchain technology and decentralized applications (dApps) has laid bare the limitations of existing Ethereum transaction systems, thereby triggering a pressing demand for an efficient and predictable gas fee structure. The proposed project aims to address this challenge by integrating the EIP 1559 mechanism with gas lanes, an innovative approach to enhance transaction predictability and network scalability. Ethereum Improvement Proposal 1559 (EIP 1559) has already marked a significant shift in the way transaction fees operate on the Ethereum network. With its introduction, users can enjoy more predictable gas fees and improved transaction inclusion reliability, while simultaneously mitigating some of the issues related to miner extractable value (MEV). Nonetheless, during periods of high demand, the problem of transaction congestion remains, which calls for a solution that can further optimize the process. This is where the idea of a multi-dimensional EIP1559 mechanism (AKA 'gas lanes') comes into play. Gas lanes propose the segregation of transactions into different 'lanes' based on several criteria [2]. This criteria could be, e.g., compute vs storage intensive messages [3]. An additional criteria could be grouping messages by the types of user. The intention is to ensure that higher priority transactions can proceed unimpeded, even during network congestion, effectively creating a fast lane for urgent transactions. This strategy is akin to implementing traffic lanes in traditional road networks to handle different traffic needs and improve overall efficiency. By combining the benefits of EIP 1559 and the gas lanes concept, this project aims to create a next-generation transaction system for Ethereum, capable of enhancing user experience and supporting the growing needs of the Ethereum ecosystem. This amalgamation not only promises to streamline transaction processes but also ensures sustainability and scalability, thereby making Ethereum more accessible and reliable for users worldwide.

Summary At any point where an SP needs to lock new Initial Pledge, they can opt to lock less than the notionally required amount, up to a maximum shortfall fraction of ⅓ of the initial pledge. In exchange for taking a shortfall in the upfront amount of collateral, future rewards are split: the SP agrees to ‘repay the protocol’ by burning a proportion of future rewards. The proportion of rewards burnt is dynamic, decreasing with shortfall. A proportion continues to be burnt until the obligation is gradually paid off. The fraction not burned is distributed the ordinary way between immediate and vested release rewards. The mechanism can be generalised, so that on top of repaying the protocol through burning the amount of shortfall taken, an additional fee could be charged. This can be included if further analysis indicates it is a necessary property. Actor State Miner Actor State Miner actor state tracks one new field: shortfall_fee:

Some storage Providers have flagged that they noticed an increased spending on FIL spent for messages to the chain starting in March of this year. In this short report, we investigate recent trends in base fee, gas usage, and FIL spent by (a) the network and (b) two specific SPs who were kind enough to provide us with their miner ids. Our findings are summarized below. Base fees: Analysis shows that the base fee has been more volatile in 2023 than in 2022, with a notable increase in volatility since around mid-February 2023. The report suggests that this is not solely due to the Filecoin-Ethereum Virtual Machine (FEVM) introduction but also due to other factors, such as network growth. FIL Spent: There is an increased volatility in FIL spent during 2023 starting from around mid-February, stemming from the pattern seen in base fees. Despite the increased volatility, the average spending has remained comparable to other periods of high network activity. Gas Usage: Overall, we found a slight decreasing trend in the amount of gas used by the PreCommitSector, ProveCommitSector, and SubmitWindowedPost methods. However, there has been a significant increase in the gas used by PublishStorageDeals since December 2022, likely due to the implementation of FIP0045. Case studies: The report finally investigates two specific SPs that we will denote as SP A and SP B. Both SPs have seen an increase in FIL spent, partly due to the above reasons; however, SP-specific factors, such as increased data onboarding, have also contributed to their specific cost increase. We now describe each of these findings in more detail. Base fees.

Is the recent upwards trend on base fees caused by FEVM? TL;DR. There is no evidence to clim that the recent increase in Filecoin network base fees directly related to the Filecoin Ethereum Virtual Machine (FEVM) gas usage. Factors such as macroeconomic conditions, increased gas consumption, and potential decrease in blocks produced have likely contributed to the rise in base fees. Introduction In this report, we explore recent trends in the Filecoin network's base fee and discuss possible reasons for the increase in this quantity since mid-February. The Filecoin Ethereum Virtual Machine (FEVM) is not solely (or significantly) responsible for the base fee spike. Instead, other factors have played a role, such as favorable macroeconomic conditions, increased gas consumption, and network growth. In addition, we also investigate a recent decrease in the number of blocks produced. All data is sourced via Sentinel. Key Findings Weekly base fee We plot the distribution of base fees every week below. From that plot, we can observe that the lower tail of the distribution of the base fee became shorter for the two weeks after the FEVM launch. This means the base fee for those two weeks was more concentrated around the 0.1-1 nano FIL/gas unit values. We can also observe, however, that for the last two weeks, such a lower tail has been expanding. Effectively, this means that during the previous two weeks, there was a significant portion of time where the base fee was lower, signaling a potential deceleration (or decline) from the spike.

Duration Multiplier Policy --- Extreme Scenario Analysis Authors: {Vik, Kiran, Tom} @ CryptoEconLab Summary This document is a summary of analysis that explored different sector duration multiplier (SDM) policies, across storage provider (SP) responses to the policies, and investment and onboarding environments. The key takeaways are: Filecoin's economy has massive potential for growing utility this year and SDM can enhance this substantially. It is also acknowledged that in extreme scenarios, introducing a duration multiplier with the wrong parameters could lead to lower data onboarding and lower raw byte power (RBP), depending on what type of constraint dominates growth in the short term. On the basis of considering more extreme scenarios, in the current iteration of the FIP-0056 draft we advocate for a precautionary approach. We suggest a maximum duration multipler of 2x at 5Y commitment, which corresponds to a SDM slope of 0.285.