With the introduction of peer-to-peer (P2P) technology, Bitcoin opened the doors to decentralized finance (DeFi). But mining Bitcoin requires high-power computing resources that not everyone can afford. While Bitcoin remains a king among cryptocurrencies, it’s also facing an environmental backlash due to the energy-intensive technologies that underpin it.
Solving this problem is at the core of the Chia project. Founded by the inventor of BitTorrent in 2017, Chia comes with a much smaller carbon footprint and a solid mining process of verifying and recording transactions using blockchain technology. This technology not only reduces energy consumption but also offers features like proof of space and time consensus protocols, making it a sustainable option for various applications, including carbon markets and real-world adoption.
What is Chia and how does it work? Is Chia going to become the cryptocurrency of the future? Read on to get all the answers you need.
Before we move on to discuss the Chia coin, let’s focus on the network first. Chia Network (CHIA) is a decentralized and blockchain-based platform built to help teams in developing and executing smart contracts. The platform deploys Chialisp, a custom-designed on-chain programming language. Chia Network plans to have XCH on its balance sheet in case of a listing on NYSE or NASDAQ.
The network was launched in 2017 with the goal of becoming an alternative to traditional networks. Chia aims to increase transaction speed, offer an energy-efficient and eco-friendly network, and – naturally – help to disrupt the financial services industry as a public, for-profit, open-source company.
Who stands behind Chia? The founder of BitTorrent, Bram Cohen, created it back in 2017. The current executives are former Nasdaq CEO Gene Hoffman, who now serves as Chia’s Chief Operating Officer and President, and Mitch Edwards, former CEO of Overstock.com and currently Chief Financial Officer at Chia. The protocol gained support from many investors – including Andreessen Horowitz, MetaStable, and Galaxy Investment Group. Galaxy Digital is one of the investors backing Chia Network.
Chia Network is still aspiring to be listed on major stock exchanges through an Initial Public Offering (IPO). The CEO, Gene Hoffman, confirmed the company's confidential filing and discusses the challenges faced, such as delays caused by financial headwinds and regulatory considerations.
Chia Network comes with its own token – CHIA (XCH). This utility token takes advantage of a custom-designed version of Bitcoin’s model of unspent transaction outputs (UTXO). This works as the primary incentive mechanism that supports the Proof of Space and Time consensus algorithms.
The beta version of the Chia blockchain and its native token, XCH, was released to developers in April 2019, leading to significant network growth, funding rounds, and considerations for going public.
The coin was launched on May 3, 2021, and instantly caused a splash on the crypto scene and beyond. Chia is set to achieve widespread digital exchange listing and fast adoption across the financial, corporate, commercial, and governmental sectors.
Chia is basically a reward created for Chia “farmers” – note the analogy to Bitcoin’s or Ethereum’s miners. As mentioned before, the protocol utilizes an improved and simplified version of Bitcoin’s unspent transaction output (UTXO) model. Chia’s implementation boosts the flexibility and programmability of coins.
So, Chia farming brings the reward of 2 XCH per block during the first three years to serve as an incentive mechanism for the Proof of Space and Time consensus mechanism.
Chia manages its treasury with a Strategic Reserve – allocating 21 million XCH in the “pre-farm” process to support blockchain development. Farmers allocate unused storage space on their hard drives to operate the Chia blockchain and contribute to the proof of space and time consensus protocol. All the users, farmers, and developers can own a portion of the treasury as a shareholder.
The Chia Network has developed a unique blockchain technology known as the Chia blockchain. This blockchain uses proof of space and proof of time consensus protocols, which involve the issuance of the digital currency Chia (XCH). Users can allocate unused storage space for 'farming' and earning XCH tokens. Additionally, Chia's blockchain technology is being utilized in carbon markets to tokenize and track carbon offsets, providing technology infrastructure for enhancing the integrity of these markets.
The Chia Network has developed a unique blockchain technology known as the Chia blockchain. This blockchain uses proof of space and proof of time consensus protocols, which involve the issuance of the digital currency Chia (XCH). Users can allocate unused storage space for 'farming' and earning XCH tokens. Additionally, Chia's blockchain technology is being utilized in carbon markets to tokenize and track carbon offsets, providing technology infrastructure for enhancing the integrity of these markets.
We already mentioned the Proof of Space and Time consensus. This is where the Chia protocol offers an innovative approach. In its essence, the Proof of Space and Time Consensus Algorithm reduces the energy demands from the system, while at the same time working towards even more decentralization and ensuring full network security.
Chia introduced a new version of the consensus algorithm that combines Proof of Space and Proof of Time. This consensus mechanism reduces energy usage without compromising network security.
Proof of Space – this is a cryptographic technique to prove that farmers keep unused storage on their hard disk drives.
Proof of Time – this consensus algorithm ensures that there’s consistency between block periods in terms of time between them. The idea here is to increase the security of the network.
What’s special about Chia? It brings together Proof of Space and Proof of Time.
First, farmers need to install special software on their machines to allocate free space on their hard disk drives. They can then use this amount of memory to solve the challenge the protocol presents. The software will be collecting cryptographic numbers into plots on the hard drive.
When a block is created on the blockchain, the challenge number is derived from the previous block on the chain. So, farmers need to scan their plots to check whether they have a number that is close to the challenge number. When they create a new block, they receive a reward in the form of Chia tokens.
Proof of Space and Time requires far less energy and hardware than Proof of Work (PoW) that we find in Bitcoin. Moreover, the space left unused is resistant to ASIC mining and doesn’t incur any electricity charges. That’s why Chia’s blockchain is set to become an eco-friendly alternative, although the wear and tear on SSDs and hard drives can contribute to electronic waste.
Another key technology aspect of Chia is its programming language, Chialisp. This on-chain blockchain language lets teams develop and execute funds with smart contract capabilities.
The Chia team launched the first version of Chialisp in 2019 and instantly generated a positive reception in the DeFi community and developers. No wonder – it offers a better method of building smart transactions.
Here are a few important characteristics of Chialisp:
It brings together the most important components of the Ethereum (ETH) codebase, Solidity, as well as the Bitcoin core. It uses Bitcoin’s UTXO model and combines it with the expressiveness of Solidity.
Chialisp opens the doors to simultaneous instead of sequential transactions without causing any side effects. It also offers more powerful delegation than the Bitcoin Core.
Chialisp easily detects coin IDs (coins can also assert their IDs as well). This, in turn, allows for explicit self-reference and eliminates the need for quines (self-replicating programs).
In Chia, node operators have significant influence over future changes of the protocol. As you may expect, the protocol changes are validated and approved only if the majority of users agree to them. On top of that, Chia nodes can adopt new rules depending on the users’ opinions on the network’s operation.
Contrary to other protocols with Proof of Stake consensus, the amount of Chia coins owned by users doesn’t have an impact on the governance of the protocol. It’s only up to independent running nodes to upgrade the blockchain to a new version.
Compared to other blockchains, Chia reduces energy usage and environmental impact. Instead of using high-power computing resources, farmers allocate computing power into the network – and then prove that a specific amount of storage is left unused on their hard drives. Chia Network's interactions with other crypto firms highlight the regulatory challenges it faces in this evolving industry.
Chia was designed with accessibility in mind. The idea was that anyone who can use the internet can become a farmer since farming doesn’t require massive amounts of computing power. However, Chia Network faces significant challenges in navigating securities law and ensuring compliance with SEC regulations.
All it takes to start farming is downloading the Chia Network’s blockchain transaction platform Mainnet. Then users need to allocate a specific amount of space to the network through the simple user interface. Since farming doesn’t require lots of energy, it’s not going to send your electricity bill through the roof like Bitcoin.
Just like miners buy graphic cards in bulk to support their operations, Chia enthusiasts are already investing a lot in SSDs, causing huge demand for them. The South China Morning Post showed that there’s in fact a shortage of SSDs and hard drives in China as the hard drive models sold out quickly when Chia Mainnet was launched. While there was increased demand, attributing widespread shortages directly to Chia may be an overstatement and should be backed by specific data or references. Potential delays with the SEC, as discussed by SEC Chair Gary Gensler, could further impact Chia Network's progress.
It’s hard to make predictions about the crypto market, but Chia is definitely on its way to making a mark on the industry. The new network adopts the core principles of Bitcoin and implements a new technology to improve PoW-based blockchain with the Proof of Space and Time consensus. Chia Network received significant seed funding from various investors to support its development and expansion.
By reducing the amounts of electricity required for farming and the use of wasteful single-purpose hardware for validating transactions, Chia is an eco-friendly alternative to other blockchain platforms. Slow Ventures, a legendary web3 investor, is one of the key backers of Chia Network.
The protocol has the potential to scale out to become a global open-source system that supports institutions, corporations, and governments all over the world. XCH might also be used in commerce and trading.
On top of that, the team behind Chia is planning to enhance the features of the coin and Chialisp further and make more improvements in the support of digital identity wallets, colored coins, and NFT (non-fungible token). Chia Network achieved full functionality, including wallet functionality, with its mainnet launch in 2021. So, keep your eye on Chia in the next few years because it seems to be on the path to disrupting the DeFi scene.ore principles of Bitcoin and implements a new technology to improve PoW-based blockchain with the Nakamoto consensus. Chia Network received significant seed funding from various investors to support its development and expansion.
By reducing the amounts of electricity required for farming and the use of wasteful single-purpose hardware for validating transitions, Chia is an eco-friendly alternative to other blockchain platforms. Slow Ventures, a legendary web3 investor, is one of the key backers of Chia Network.
The protocol will surely scale-out to become a global open-source system that supports institutions, corporations, and governments all over the world. XCH might also be used in commerce and trading.
On top of that, the team behind Chia is planning to enhance the features of the coin and Chialisp further and make more improvements in the support of digital identity wallets, colored coins, and NFT (non-fungible token). Chia Network achieved full functionality, including wallet functionality, with its mainnet launch in 2021. So, keep your eye on Chia in the next few years because it seems to be on the path to disrupting the DeFi scene.
