Cryptocurrency “chia”: green, but…

At the risk of repeating myself, most cryptocurrencies, including bitcoin, are real environmental disasters. The software behind these currencies is not installed on a central server that keeps them running, but rather on thousands of computers belonging to “miners”, who are constantly adding computing power to the network by cryptocurrency exchange.

This mining is an intensive process, especially with bitcoin, which requires as much energy as the annual consumption of countries like Chile or the Netherlands, according to different estimates. At the heart of the problem, the “proof of work” system, which I explained in April in a text entitled “We need to talk about bitcoin”. Fortunately, there are less energy-intensive alternatives based on so-called “proof-of-stake”, such as cardano. We then no longer rely on raw computing power, but rather on the fact that the verification of transactions is carried out by trusted participants.

Those looking for an even less energy-intensive cryptocurrency are offered a new option: chia, which works by “proof of space and time”. This concept, pioneered by the creator of the decentralized sharing software BitTorrent, Bram Cohen, does not monopolize miners’ computers with artificially complex calculations, but rather takes up free space on their hard drives. In short: your hard drive creates virtual money because it is filled with data that is used for the proper functioning of the network. But it is not very busy, so it does not consume a lot of energy.

In this system, we no longer speak of “miners”, but of “farmers”, since a farm always continues to produce, unlike a mine, which ends up emptying.

While mining bitcoin or ether (the currency of the Ethereum network) requires powerful computers, almost any device can in theory be used to create a chia farm. For now, it requires a computer, but even an old smart phone could earn its owner chias if a compatible app was launched.

Towards a shortage of hard drives and SSDs

If farmers were content to connect their old hard drives and existing space to the network, chia would look like the perfect cryptocurrency: its blockchain can be used to develop applications (it even has its own programming language) , its energy consumption is low and the network is fast enough to make it a more efficient payment solution than bitcoin, for example.

Screenshot: Maxime Johnson

In practice, however, the arrival of chia earlier this year has led to a hardware buying spree. Farmers aren’t just using up their existing space, they’re getting new hard drives and SSDs instead (which in turn speed up the process of creating new farms, but need to be replaced periodically).

Mining companies have also started a shift towards chia. These are then hundreds, even thousands of devices that are dedicated to the currency in data centers.

And this trend is on the rise. Between the time chia became publicly available in mid-March 2021 and last April 28, farmers added an exabyte to the network, the equivalent of more than a million terabyte hard drives. . A second exabyte was then added by the farmers in just six days.

In the short term, analysts expect a shortage of high-capacity hard drives and solid-state drives, which could drive up prices. Taiwanese manufacturer Adata’s SSD orders jumped 500% in April. If chia were to experience the popularity of bitcoin in the longer term, it could affect the entire supply chain (computers, data centers), such as what has been observed for the past few years with graphics cards, difficult to buy due to their utility in mining certain cryptocurrencies.

Lots of money at stake

Even though chias can be accumulated since March, it is only since Monday that they can be exchanged. They sell for nearly $800 apiece, but trading volume is low, as farmers prefer to wait for a price boom, like the one experienced by bitcoin and ether.

The biggest owner of chias is Chia Network, the company behind this cryptocurrency, which counts among its shareholders investment giants like Andreessen Horowitz, a venture capital firm that made its fortune investing in Skype, Facebook, Airbnb and Twitter. Chia Network raised 21 million chias before opening the network to the public (regular farmers have “harvested” around 500,000 chias to date).

Currently, this reserve fund is worth more than $16 billion. However, rather than being liquidated, the fund should be used to stabilize the value of chia on the market and, above all, be counted as an asset when the company is launched on the stock exchange, on a date which has not yet been determined. Chia Network could thus raise billions of dollars without causing the value of the cryptocurrency to plummet, as would happen if it sold its 21 million chias.

Chia is indeed a greener alternative to bitcoin. But don’t be fooled: the greenest thing about this cryptocurrency is the color of the banknotes that the developers and investors behind the network will pocket.

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Cryptocurrency “chia”: green, but…

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