Desperation Among Filecoin Miners Creating a Big Market for FIL Borrowing

Filecoin miners are paying large investors an annual percentage rate as high as 40% to borrow FIL, the closely-held native token required to participate in the decentralized storage network.

The lack of liquidity in tokens required to mine on the proof-of-stake storage network is forcing desperate miners to borrow FIL rather than going into the open market to purchase tokens.

Recently, he told CoinDesk rates for lending FIL to miners was initially at 8% but then went up to 15%. This week, the rate skyrocketed to 40% and Mosoff decided on Thursday to lend 3,500 FIL of his personal holdings, worth $98,000 at current prices.

Here's how the loans work: Miners borrow the FIL instead of buying it at expensive spot prices.

The return to a lender is in the form of FIL tokens on a percentage basis, sometimes as high as 40%. The hope from the miners' perspective is the price of FIL continues to experience sell pressure when the loan matures, according to Mosoff.

Filecoin miners have very specialized equipment and they require the FIL token for collateral as a trust mechanism in order to complete "Deals" to provide storage for users.

This development came after some Filecoin miners demanded more reward tokens as part of a readjustment of the economic model by Protocol Labs.The Filecoin project's IPFS is a distributed rival to Amazon's S3 or Google Cloud storage product.

In return, miners are paid in filecoin but ironically, some of the biggest potential participants are getting a raw deal since they don't own enough FIL to stake.

CoinList's Duval characterizes the FIL lending rates as a short-term situation - lending terms are generally three months - because miners consistently hash on the network.

"Miners won't need to borrow filecoin in the long run because they're going to have so many FIL rewards as collateral."