Some days ago Elon Musk, founder of Tesla, announced on Twitter that the automaker has suspended vehicle purchases using Bitcoin with the concern of rapidly increasing use of fossil fuels for Bitcoin mining and transactions. Elon likes to give surprises! He was promoting Bitcoin some months back and now he takes a U-turn to declare that Tesla is looking at other cryptocurrencies that use <1% of Bitcoin’s energy consumption. Bitcoin’s trust-minimizing consensus has been possible due to its proof-of-work algorithm and it is obviously known as an energy-intensive cryptocurrency. Although Bitcoin maximalists argue that more than 75% of miners use renewable energy, it is really debatable.
Image Source - Annualized Total Bitcoin Footprints
Chia Network launched its new cryptocurrency Chia (XCH) last month. Chia isn’t a new project. Bram Cohen, the inventor of the BitTorrent network founded the project in 2017. Bitcoin’s role as transformative digital money is undeniable in financial history but mining of Bitcoin is mainly controlled by powerful entities. The centralization of Bitcoin’s consensus network happened due to the emergence of specially designed data centres built in and around inexpensive electricity zones. The speed of Bitcoin transactions is slow and that’s why we see so many new competitor blockchain projects which are coming up with high TPS solutions. The limitation of Bitcoin’s script doesn’t allow significant changes to be deployed in the protocol easily.
“As a starting principle, well-designed digital money should be easier to use than cash and harder to steal. Properly formulated, the security of your digital money should not depend upon a team of experts to be secure. Losing keys should be easy to recover from. Anyone, including individuals on their home computers, should be able to participate in the validation of transactions. Anyone should be able to farm -- our version of mining -- instead of a few large powerful entities.” – Chia revised whitepaper
Bitcoin doesn’t support smart contracts in the base layer. Ethereum came up with the concept of smart contracts and was projected as a platform for building decentralized applications. Ethereum is obviously successful in developing the DAPP ecosystem. DeFi or decentralized finance is the hottest buzzword today and it emerged from the Ethereum blockchain only. The ‘Solidity’ scripting language of Ethereum makes it easy to create applications but securing the applications has remained a problem. Every week fresh news of a smart contract hack appears in the market. Ethereum has a scalability issue also. Ethereum 2.0 can solve many problems of Ethereum and it’ll also change Ethereum’s consensus mechanism from proof-of-work to proof-of-stake but the roadmap is still hazy. Proof-of-stake will still accumulate power within some entities with large stakes.
Chia blockchain has a new Nakamoto consensus algorithm called proof-of-space and proof-of-time. Proof-of-space is similar to proof-of-work but instead of computation, storage is used. After the release of Bitcoin, a lot of research has been done in this field. This method doesn’t consume significant electricity or requires any specialized hardware. Electricity price has no direct relation with maintaining storage and it allows Chia mining to be widespread across the globe. Chia mining has been referred to as ‘Chia farming’ in the whitepaper. Chia wants to achieve better decentralization than proof-of-stake or proof-of-work blockchain by enabling easy global participation. The second component of the Chia blockchain is proof-of-time which provides additional security. Chia supports smart contracts in the base layer and the smart contract language is based on Lisp programming language (it is called Chialisp).
“Users of Chia Network’s blockchain will plot unused space on their hard drive, by installing software which generates and stores a collection of cryptographic numbers on disk into plots. These users are called farmers, as opposed to Proof of Work’s miners.” - Chia revised whitepaper
Chia blockchain is intended to be ‘green’. Tesla’s search for a greener cryptocurrency has fuelled good interest in this newly launched cryptocurrency which has good investor backing. Chia has been designed to be environment-friendly while delivering top performance. The farming competition of Chia is already going up as the farmers are adding more space to the network. Chia is making mining accessible by everyone. As per the reports, there has been tremendous demand for Chia farming in China and the hard drive and SSD prices have skyrocketed on secondary markets. Amazon has recently rolled out Chia mining solution on AWS for Chinese customers. The digital asset has been listed on top global exchanges like Okex and Huobi already and the present price momentum looks bullish. Most probably, Bram Cohen’s BitTorrent success story has created enough hype for Chia.
Estimated earning from Chia farming – It depends upon the number of plots (hard disk space) that you would like to dedicate [Calculated by Chia Calculator]
There are some words of caution also. Although the proper circulation figure of Chia is unknown, the whitepaper clearly says that 21 million Chia has been pre-farmed to pay homage to Bitcoin and it’ll take approximately 21 years from mainnet launch for farming rewards to equal the size of Chia Network’s Strategic Reserve as trailing emissions begin to slow down in the 13th year. Such pre-farming magnitude is abnormally high. It is possible that the price of Chia won’t be dictated by the market initially. The vesting schedule also is really not clear. It’s important to note that Chia Network aims to get listed in the stock exchange and wants to provide the same transparency of a publicly-traded company. The roadmap obviously looks very different as Chia wants to be regulator friendly. Chia’s novel approach is impressive but the implementation phases need more clarity. Have a look at this new hot digital asset!
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It would be interesting to see the cradle-to-grave impact those hard drives have, how that compares to the graphics cards used for mining right now and in what stages of the life of the equipment those advantages and disadvantages may be. Very cool read!
Love that they chose the name Chia! Maybe it's an homage to those Chia pets that were so easy to grow that the average person could do it! Seems to fit their mission of being an energy efficient cryptocurrency that isn't hampered by electricity costs and creates less energy pollution. I think the goals of Chia are lofty, but if successful could revolutionize the space and create more diverse, global decentralization with a fraction of the carbon footprint. Will be keeping a close eye on this project for sure!