Against the background of a general decline in the cryptocurrency market in May 2021, the Chia Coin token, which sales have just started, drew attention to itself in reverse dynamics. Is it related to green farming technology on the Chia Network blockchain? Is it technology or hype?
The inventor of the BitTorrent protocol, American developer Bram Cohen, founded the Chia Network in August 2017. The startup’s investment offer in 2018 attracted $3 million to the project, and in subsequent rounds, the amount of investment increased to almost $30 million.
At the time of writing, the market capitalization of the Chia blockchain exceeds $280 million according to coinmarketcap.
It is worth noting that all this time, from the founding of the platform and up to the launch, the blockchain has produced a strategic reserve — a stock of coins, Chia Coins (XCH), which in the future should provide the project with the opportunity to stabilize the currency in the market. And not only on the crypto market.
The project, and its main distinguishing feature, works on a fundamentally new Proof-of algorithm. On this occasion, David Frazee, managing partner of Richmond Global Ventures, which invests in the project, said:
It is as if bitcoin was created with all the knowledge that has been gained over the past 13 years.
Instead of power-hungry Proof-of-Work mining, Chia is based on the Proofs-of-Space-and-Time algorithm, which the project founders pretentiously describe as the first after Bitcoin and a new interpretation of Satoshi Nakamoto’s consensus algorithm. According to it, free disk space is used as a transaction validator, and miners are rewarded for providing this space to support the network for a certain amount of time.
Proof-of-Space-and-Time is at the same time the marketing message of the startup. They claim that the consensus method in the Chia blockchain requires ten times less energy than mining in Bitcoin or Ethereum. Indeed, the power consumption of a hard drive is much lower than that of an ASIC. But is this an advantage devoid of flaws?
New Language For Smart Contracts
The preliminary work on the project, which lasted for several years, consisted not only of mining the reserve. An innovative programming language, Chialisp, was created for the blockchain and acts as a development environment for smart transactions. The developers are positioning it as “powerful, easy to audit, and secure”, as well as introducing more modern cryptographic tools to enable richer smart transaction capabilities. You can find detailed technical documentation on Chialisp and types of reference smart contracts on a page dedicated to this programming language.
In general, blockchain today consists of several repositories, which include:
- Code dedicated to consensus, networking, and reference implementation of Chialisp.
- Electron/React graphical user interface for plotter, node, and wallets.
- Chialisp virtual machines in Python and Rust.
- Protocols of Proof-of-Space-and-Time, etc.
Mining On Space And Time
Those wishing to mine need to click the install button on the home page of the platform, check their hardware configuration for acceptability, and follow the instructions.
Mining itself (the project participants prefer the word farming, because, remember, this is a green technology, which is directly associated with the cultivation of the plot on the farm) is that the allocated plots will be stored tables with hashes. This is the seeding of the empty space.
The hash here is a simple cryptographic number that matches the complexity and amount of space occupied by the area provided. There is no need to create and maintain nodes.
When forming a block, the blockchain searches the network for the hash closest in its configuration to the task at hand and rewards the one who has it. This part of the mining matches the category of Space, in the stated principle of Proofs-of-Space-and-Time. The probability of reward for a miner increases in proportion to the size of his plot relative to the entire network.
The Time category corresponds to the interval required for transmission between blocks. A verifiable delay function, which takes a certain amount of time to compute implements Proof-of-Time here.
When The Hardware Fails
The technological basis of the platform just seems to be the vulnerable point and source of hype around blockchain. It’s not hard to guess the impact of the Chia launch on the hard drive market.
Launched on March 19, 2021, the main blockchain mining network grew to 10 exabytes (10 million terabytes) in two months of operation. A shortage of solid-state drives (SSDs) was already noted in Hong Kong before the launch of the main Chia network.
More moderate critics point out that providing disk space for blockchain leads to premature wear and tear of the drives. Fast Technology analysts say that mining Chia Coins on a 512GB SSD can put the device out of service in just 40 days, while the average SSD consumer has about five years of service. A 1 terabyte drive, according to the publication, will last about three months, and a 2TB drive will last six months. The reason for such early wear is probably because hard drives are operated 24 hours a day.
Massive wear and tear of the drives, according to Fast Technology analysts, could lead to a flooding of the aftermarket with hard drives burned during Chia Coins mining. Externally, they will not differ much from normal, but in the process of operation, they can be slower and do not last long.
Cryptocurrency miners, however, do not see any reason for alarm in the early wear and tear of the drives, since even in such a short period of operation the hardware more than pays for itself.
Low Entry Threshold
Besides the purchase of hardware, other skills from the miner are practically not required, and the first starting months of the platform show good financial results. So, after some hesitation and spikes up to $1,500, the token rate has relatively stabilized and is currently traded close to $550.
The increased attention to Chia, however, may also generate a legitimate effect — increased competition between miners, and as a result, a decrease in liquidity. But this is only a guess.
That’s why Chia does not hold an ICO but expects to hold an IPO that meets the requirements of the US government’s Securities and Exchange Commission. The creators of the coin expect that it will begin trading on the Chicago Stock Exchange, similar to stock trading, which will be secured by cryptocurrency.
Here, to reduce the volatility of Chia Coin will be used the same strategic reserve created as the result of pre-farming. Now, after the start of the blockchain in the public network, every 10 minutes, miners are rewarded with 64 tokens. Over the next 12 years, the amount of this reward will be cut in half — every three years. After that, it becomes permanent forever — 4 coins every ten minutes.