Failures of Competing Projects: Ramifications for FileCoin?

This question is raised in Reddit by EndThePurge and re-posted here, which I personally think is important to be addressed.

FileCoin, still in development, is the most prominent and best-funded of the four “storage coin” projects. Arguably, it’s also the earliest-stage, or “furthest-behind”, of those projects. By “storage coins”, I mean currencies which are mined primarily through the use of hard drive space, where rewards are issued for storing data rather than performing calculations on CPUs, GPUs, ASICs, etc. This isn’t to say that “storage coins” are computation-free, but just that storage is the main criteria for mining.

I’ve observed the following regarding other storage-coin projects:

BURST: This is the oldest storage-coin network; it's also the technically-simplest, and its coin is widely traded on exchanges, which isn't the case for FileCoin. In a sense, it has the strongest infrastructure; the BURST mainnet is online, and the software is effectively out of beta. However, BURST is also effectively dead; the token has lost ~96% of its value from ATH, and BURST mining is absurdly unprofitable, as reported by a reputable source here: https://www.youtube.com/watch?v=nJ4ea5NNqcg. BURST suffers from relatively high computational overhead; plotting drives for BURST mining is both slow and computationally-expensive. Since it's impossible to earn anything by mining BURST, nobody is doing it, which means no meaningful amount of reliable storage is for sale, which means nobody is using it, hence the "death spiral" of the network.

STORJ: This is the second-oldest coin; it retains some value (more than BURST), though most STORJ miners are doing GPU mining; the STORJ algorithm allows both HDD and GPU mining (same algorithm as ETH, so can be mined with ASICs for ETH as well). Only the GPU mining is at all profitable, and even that is rarely done; generally it's better to mine ETH instead. As with BURST, STORJ is reasonably trade-able, supported by Poloniex, etc.

SiaCoin: This is the second-newest coin (only FileCoin is newer), and the project is more similar to FileCoin than any other project. It's also the second-most-complex project. However, token value has collapsed, as with BURST. Source: https://www.coinbase.com/price/siacoin

My question is this: What does the failure of competing projects mean for FileCoin? Is the failure of competitors a positive sign (because FileCoin will face little competition), or is it a negative sign (perhaps indicating that the business model itself is untenable)?

It’s a good question that is worth doing more analysis to try to answer better. I don’t have a strong opinion and could see either of your proposed directions (positive or negative) making sense.

In order to think about this clearly it is worth understanding the different characteristics of each network. I am not an expert on the projects mentioned above but from what I know they are all actually fairly differentiated. For example Sia maintains a decentralized storage market on top of a PoW based blockchain consensus mechanism. Burst aims to use a proof of space consensus mechanism but AFAIK is not aiming to store files for users. Filecoin aims to use a proof of storage consensus mechanism to incentivize miners to store user specified files. This variation in system design is enough to make comparisons of business model viability seem non-trivial.

It’s worth including projects newer than Filecoin when thinking about this too. In particular spacemesh and chia are newly forming networks worth looking into.