Hard Disk or Financial Product? The Effect of the “Bitcoin Killer,” Chia Coin

2021-05-19, 06:05

On May 13, 2021, Tesla CEO Musk Tweeted that due to the fossil fuel consumption caused by mining, they stopped accepting Bitcoin as payment for Tesla products. At the same time, they will seek more eco-friendly cryptocurrencies.

In the heated response, a number of new cryptocurrencies were mentioned. For example, the so-called “Green and eco-friendly” Chia Coin.

Image Source: https://www.chia.net/

What's Chia Coin?

Chia was registered in August 2017, aiming to develop a deal-only platform to optimize the blockchain. It established a dedicated Chia Network for the global financial and payment system and became the first enterprise-level cryptocurrency.

Chia's founding team includes BitTorrent founder Bram Cohen, Vindicia's former founder, and CEO Gene Hoffman, and Overstock.com's former acting CEO, Mitch Edwards.

Since its establishment, Chia Network has raised about $16 million in rounds of financing from many well-known Wall Street investment institutions. It announced an IPO by equity subs-cription on the Nasdaq in August 2021, with a total amount estimated to be between $30 -50 million.

Chia’s token, XCH has hit a record high of more than $1,300, since mainnet launched in March 2021. Going public on major exchanges in May pushed its all-time high close to $2,000.

XCH price trend in the past 14 days

As the farming fever for Chia continued, demand and prices of hard disk skyrocketed, once triggering a CCTV report:

Image Source: CCTV financial news

What are Chia's technical highlights?

“We anticipate that chia farming will be more decentralized than Proof of Work or Proof of Stake and significantly less energy and resource intensive.” Chia wrote in its business paper.

In the past, most cryptocurrencies, including Bitcoin, have been adopting the Proof-of-Work system. When processing Hash functions, the need for computing power increases as difficulty increases, so a lot of energy is wasted. Later, in the Proof of Stake mechanism (PoS), mainly applied in Ethereum, holders with more tokens will obtain new tokens in the form of interest more easily, which is bad for fluidity.

With the advent of related chips like ASIC, some cryptocurrencies are gradually facing the challenge of becoming centralized, becoming monopolized by professional mining sites.

To break this pattern, Chia uses a new Nakamoto consensus algorithm called Proof of Space and Time, which is not directly related to computing power and does not reward people for holding more money, all the participants were able to take advantage of their computer's hard drive.

Firstly, it uses the spare space on the hard drive to complete a Proof of Space, in which mining software fills the rest of the disk (P disk) with hash data. More space means more "lots", and users with a larger percentage of lots are more likely to win a prize when the pieces are assembled by software.

Based on the Proof of Space , Chia adopts another consensus algorithm, Proof of Time, to coordinate the verification of blockchains. The time is determined by an ordered storage certificate,and then the program will verify whether the storage provider really saved the data within a certain period of time. A dedicated time server will verify the chains sequentially. Once a new forged chain with time inconsistencies is discovered, it will be abolished.

Through the combination of these two mechanisms, Chia on the one hand relieves the heavy resource and energy consumption in traditional mining. It also avoids the concentration of tokens to some holders over time. Hence, why Chia is also called the "Bitcoin Killer ''.

How to get Chia coins?

There are two steps to get Chia: plotting and farming. Plotting is to install and debug mining software on idle equipment. The software will occupy about 332 GB of disk space in installing and about 105 GB of space after installation. After the installation, you can start farming. As mentioned earlier, different from traditional mining, getting Chia coins is not directly related to high computing power. High performance graphics cards and ASIC chips do not guarantee a high return of Chia. With the gradual popularity of large-capacity hard drives, many personal computers, even laptops, can participate in Chia farming.

But unlike most other cryptocurrency projects, Chia does not plan to launch an ICO, nor does it plan to start private placements or presales. In addition to the strategic reserve of 21 million pieces, the rest will have to be obtained from "farming". In the Chia network, the term "mining" is replaced by "farming", and "miners" have also become "farmers."

Image Source: Twitter

Chia coin (Gate.io code: XCH) is also available on Gate.io and other major exchanges. Users can trade XCH with USDT or ETH on Gate.io's cryptocurrency exchange

XCH/USDT: https://www.gate.io/en/trade/XCH_USDT
XCH/ETH:https://www.gate.io/en/trade/XCH_ETH

Is Chia really green and environmentally friendly?

Chia mining requires no resources other than hard disk space, and consumes very little bandwidth, which seems to be more environmentally friendly than traditional graphic mining.

Despite the large market and sufficient production capacity, there have been many cases of hard drives being used for constant Chia farming, whose life-spans were reduced from 5~10 years to around 40 days. Some hard drive manufacturers have even publicly stated that the hard drives used for mining will lose their warranty. As hard disk farming becomes more and more popular, more hard drives are put into farming Chia, which means more hard drives will be scrapped in advance. Obviously, it is not completely beneficial to our environment.

What is the future of Chia?

Chia’s emphasis on payment ubiquity is designed to perfectly support a variety of smart transactions, including atomic exchanges, authorized payees, recoverable wallets, multi-signature wallets, and limit wallets.

As Chia’s white paper stated, “At present, only banks, governments or DeFi organizations are using Chia to build new financial technologies that can solve all kinds of cross-border payment problems, but one day we'll be able to use Chia to buy coffee in the Bay Area.”

Reference:
Chia official website: https://www.chia.net/
Chia Green Paper: https://www.Chia.net/assets/chiagreenpaper.pdf
Chia White Paper: https://www.Chia.net/assets/Chia-Business-Whitepaper-2021-02-09-v1.0.pdf

Author: Gate.io Researcher: Gazer.C Translator: Edward.H
* This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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