The key to Filecoin and Arweave accruing value?

With the rise of Ordinals on Bitcoin (BTC) sparking debate about how users should store their NFTs and blockchain gaming projects looking for cheaper, secure ways to store data, it’s time to revisit the discussion around decentralized storage coins.

Decentralized storage protocols Filecoin (FIL) and Arweave (AR) show similar price actions, leaving investors with a decision between the underdog showing signs of increased adoption by NFT users and blockchain gaming projects and the clear leader in market cap and adoption.

The total market capitalization of the entire digital storage cryptocurrency landscape today is $4.87 billion, according to data from CoinMarketCap, and each protocol offers something different. The two largest projects in the space by market cap that specifically address storage needs for NFTs and blockchain games are Filecoin and Arweave. Filecoin is currently the top rated project in the sector. It ranks 27th on CoinMarketCap by total market capitalization, but Arweave has significant on-chain activity and fundamental news that deserves attention.

The primary difference between the projects is their focus. Arweave is focused on long-term data storage with a one-time payment model, while Filecoin is more focused on incentivizing large-scale storage, especially for private data, and uses a tiered payment model based on storage time and space requests.

Filecoin recently announced that it would launch smart contracts, consolidating its new position as a tier-1 platform. This development has led to speculation about Filecoin’s future success in deploying Web3 offerings with real services such as computing and storage, supported by Filecoin’s open marketplace for decentralized storage.

Given the current volatile crypto and macro climate, Filecoin revenue is notable at $2.53 million per month (up 238 over 30 days). During the same period, fees have increased by 33% ($2.99 ​​million), indicating strong demand for the platform. The market value of FIL is $2.76 billion, up 14% over the same period.

Filecoin has a maximum supply of 2 billion tokens and a circulating supply of around 403 million. Of the total supply, 70% is dedicated to mining rewards, which increases with network adoption. The frequency of creation of new tokens decreases over time as the network matures.

In comparison, Arweave has a much smaller market cap of around $441 million, reflecting a 30% drop over the past 30 days. However, its maximum supply (66 million) compared to total circulating tokens (~50 million) may be more attractive to investors concerned about inflation. Additionally, AR’s price has been significantly depressed since its all-time high in late 2022.

Arweave is an underdog in price and adoption, but it would be wise to note the protocol’s rise in popularity due to its unique differentiator as a permanent storage solution for public data. It can be a clear advantage over competitors when they provide infrastructure for Metaverse. Meta already uses Arweave to permanently store digital collectibles from Instagram. Despite a significant slowdown in Metaverse and blockchain gaming projects, transactions on Arweave reached a monthly ATH in February (+20% MoM).

The increase in transactions may be associated with the upcoming release of Arweave 2.6, which aims to lower storage costs and increase energy efficiency for miners while improving the protocol’s ESG status.

However, Arweave founder Sam Williams postulates that the bulk of transactions are thanks to Bundlr, which claims to increase transactions on Arweave by 4,000% without sacrificing security and with “~3,000x faster” upload speeds. Bundlr accounts for over 90% of data uploaded to Arweave.

Arweave’s price is down ~90% from ATH, despite record high transactions and partnership with Meta and Solana (SOL) blockchain. There is less difference than Filecoin, a name down almost 100% from ATH.

Meanwhile, Arweave’s “Weave” (a blockchain-like structure) size has grown by 135% YoY (134 TB). A recent report by Messari estimates that 25% of Weave is related to NFTs, while 72% is Web3 related. The report also mentions that Decentralized Social (DeSoc) projects such as Lens Protocol use Arweave as the preferred decentralized storage platform.

On the flip side, Meta too recently announced it would be “dissolution of digital collectibles (NFTs)”, which could cast a shadow on Arweave’s growth potential. Additionally, Arweave’s storage growth is overshadowed by Filecoin’s 1,390% (687,900 TB) increase over the same period.

It’s also worth considering how recent news about Amazon’s upcoming NFT market could affect the storage coin market. Arweave may have the most immediate impact thanks to its partnership with Avalanche (AVAX), considering the L-1 blockchain partnered with Amazon last year. While there is no clear news from the company whether it will use Amazon Web Services (AWS) or the InterPlanetary File System (IPFS) used by Filecoin, Arweave and several other decentralized storage solutions, the increased awareness of NFTs via Amazon may finally channel users and capital into the system. Amazon’s NFT campaign is likely to drive more traffic on the leading NFT marketplace, OpenSea, which uses IPFS and Arweave for metadata storage.

The NFT market is also showing signs of resilience, with $2 billion in trading volume in February, up 117% from the previous month, and the industry’s total value locked (TVL) climbing over 7% ($81 billion). Blockchain gaming remained the dominant sector and a space hungry for decentralized storage (45% of DApp industry activity), despite a 12.33% decline in on-chain gaming activity.

With the number of funding deals jumping 90% in February, it’s clear that there is still strong interest in blockchain gaming for the long term, and that bodes well for storage coins that are positioning themselves to help that sector.

While the rise of blockchain games may boost storage coins like Filecoin and Arweave, it is important to carefully analyze each project’s fundamental news, security and adoption trends before making investment decisions. Filecoin appears to be the stronger choice with its greater adoption, but Arweave’s steady increase in use in growing Web3 narratives remains an interesting trend to keep an eye on.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making a decision.