CoinList Aims to Reduce Miners’ Capital Costs With Low Collateral Filecoin Loans

The new lending service will require miners to put up as little as 10% collateral of the total loan value, helping them expand more quickly.

AccessTimeIconFeb 8, 2022 at 8:34 p.m. UTC
Updated Feb 9, 2022 at 9:38 p.m. UTC

Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets

CoinList, a popular token sale platform for early-stage projects, is introducing a lending service that will require low collateral upfront to borrow filecoin (FIL), specifically for new miners to begin mining.

The company aims to help new miners lower their upfront cost by providing a FIL borrowing facility that requires collateral of as little as 10% of the total loan value. “By allowing for lower collateral, storage providers can allocate their funding to store [f]ilecoin+ deals, hardware and operations, rather than FIL or other forms of collateral, allowing them to scale their operations exponentially,” CoinList said in a statement.

To start mining FIL, new miners usually need to pledge some FIL tokens into the distributed data storage network; to do so, they need to either buy or borrow the coins on top of the capital they have already invested for the storage.

This is the “biggest pain point for newer storage providers” as borrowing the coins typically requires a high percentage of collateral upfront, ranging anywhere from 100% to 130%, Scott Keto, chief operating officer of CoinList, told CoinDesk, adding that it's “just not an efficient use of capital.”

Filecoin was designed by Protocol Labs to allow users to rent hard drive space to store data in a decentralized system. It uses a proof-of-storage consensus system, handing out rewards to nodes that store and verify the data.

CoinList has had a relationship with Protocol Labs since 2017, which enables CoinList to gain access to a wide variety of FIL holders and source individual loans greater than 250,000 FIL, according to a statement.

CoinList is able to secure FIL from various sources including through its lending platform, which offers about 9% APY for a holder of FIL to lend their coins, according to CoinList's website. The platform also sources FIL from other holders through CoinList’s relationship with Protocol Labs. “Given CoinList's strong relationship with Protocol Labs (worked together since 2017, including the filecoin launch in 2020) CoinList has a lot of FIL holders on its platform,” said a CoinList spokesperson.

“With more and more enterprises exploring Web 3, secure and trustworthy data storage has never been more important,” said Stefaan Vervaet, the storage providers lead at Protocol Labs. “This is an incredible opportunity for all storage providers, but especially new and smaller ones that are looking to grow fast, while storing real user data.”

The miners can provide the 10% collateral in FIL, bitcoin (BTC), ether (ETH) or stablecoins USDC and USDT. The rest of the loan will then be collateralized via the miners’ future earnings of FIL they receive as a reward for providing storage space.

The minimum loan size is 3,000 FIL. With low collateral, the interest rate tends to amount to around 10% to 30%, depending on the provider, according to Keto.

‘Exponential growth’

To be sure, there are other platforms that are providing FIL loan services, including Binance and Youhodler, as demand for decentralized storage space rises. In fact, CoinList has already loaned over $450 million in FIL since October 2020.

“I think there's going to be exponential growth in 2022” for the decentralized storage providers, partly because of these new loan programs, but also due to the attractiveness of the business, Keto said.

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Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets

CoinDesk - Unknown

Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets