With hard disk speculation and high mining thresholds, is Chia a “green Bitcoin” or a speculative bubble?

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Bitcoin mining consumes electricity, while Chia mining consumes hard drives and time.

The original title “Hard disk price roller coaster, computing power is catching up with FileCoin, how long can Chia become popular? 》
Written by: Liu Xia

After more than three years, Chia Network’s Chia 1.0 mainnet was finally launched on March 19.

“Have you engaged in Chia?”, “The threshold is very low”, “P disk should be as early as possible”, and other words, it can be described as the top Internet celebrity project this year. Even if Chia currently only opens farming rewards (farming) and the trading function has not yet been launched, the OTC price of XCH has skyrocketed from $30 to $150.

Behind the skyrocketing price, the price of Chia mining machine has been rising all the way, and a variety of hard drives have been hotly speculated by the market.

On May 4th, Beijing time, Chia opened the exchange of tokens, and has now launched its token XCH on trading platforms such as OKEx.

Chia mainnet goes live and launches IPO

Chia received high attention from the market when it went online, which is inseparable from the star founding team behind it.

The founder of Chia Network is Bram Cohen, the founder of BitTorrent, and the COO is Ryan Singer, the co-founder and COO of Tradehill Inc. The founding team members also include Gene Hoffman, the former founder and CEO of eMusic.com and Vindicia, and Mitch Edwards, the former acting CEO of Overstock.com.

With such a star-studded founding team, it is difficult for Chia not to attract attention.

Bram Cohen

In addition to the well-known founding team, the investment organization behind Chia also has a lot of background. Chia Network has received investment from many well-known investment institutions, led by AngelList CEO Naval Ravikant, and participating investors include A16Z and Greylock.

Chia also announced the launch of the IPO process when the mainnet went live. So far, Chia has received US$16 million in financing, and Chia also officially announced that it will be listed on the Nasdaq in August this year. The participation method is in the form of equity with a total amount of US$30 million.

With hard drive speculation and high mining thresholds, is Chia a "green Bitcoin" or a speculative bubble?

Founder Cohen: Create a better “Bitcoin”

In addition to a strong team of founders and investment institutions, when it comes to Chia, the label “Green Bitcoin” is indispensable.

The so-called “green Bitcoin” is a more energy-efficient and more decentralized cryptocurrency compared to the “huge and terrible waste” Bitcoin described by the founder Cohen.

The energy consumption brought by Bitcoin mining is undoubtedly huge. At present, the electricity consumed in the production of Bitcoin in one year can be used by 20 million people for a year, and the resulting electricity is less than one ten thousandths, and the rest is wasted. Labels such as high energy consumption and unfriendly environment have always lingered around Bitcoin.

In addition, professional “mining” hardware is increasingly owned and operated by a few large entities, and the characteristics of Bitcoin’s computing power concentration have become more obvious, which is contrary to the vision of decentralization that the Bitcoin community has always promoted. However, driven by capital and interests, the idealized product of vision appears to be powerless.

Cohen, one of the founders of Chia, said in a previous interview that he wanted to create a more “green” Bitcoin to solve the problems of energy waste and centralization of computing power. This better “Bitcoin” is Chia that brings many new concepts.

New consensus: PoST

Compared with Bitcoin, Chia started to change from the underlying consensus mechanism.

The proof mechanism Chia chooses is PoST (Proof of Space and Time), the proof of space in real time. Different from the previous PoW mechanism (Proof of Work Mechanism) of Bitcoin and Ethereum, this proof method belongs to the category of PoC (Proof of Capacity). PoST can be further disassembled into two parts-Proof of Space (PoS) and Proof of Time (PoT).

The so-called space certification is to use the unused storage space on the hard disk to prove. Chia users need to install software to plot the remaining space of the hard disk, that is, fill with hash data. This process is commonly referred to as the P disk in the industry. The software generates and stores a collection of cipher numbers on the disk as plots, and users who provide storage space are called farmers. The probability of a farmer winning a block is the percentage of the space occupied by each plot in the total network space. In other words, the larger the remaining space of your hard disk, the larger the space for participating in the P disk, and the higher your probability of winning a new block. The time required to create the space proof is not long, which also leaves the hidden danger of attackers using a lot of space to create spare competitive trading history and futures.

Time proof is like adding a “wall clock” to the block, which can increase security and reduce hidden dangers for the Chia network. Time proofs determine the time by generating an ordered storage proof, which allows the verifier to check whether the storage provider has stored the data within a certain period of time. Time proof is achieved by the verifiable delay function (VDF), and the key idea is sequential calculation. This function is implemented by the VDF server (Timelord), which helps to complete a block on the network and advance the chain.

In summary, the PoST mechanism can use the remaining storage space in the storage device for mining. What Chia mining requires is not the computing power required by PoW, but storage space.

New blockchain programming language: Chialisp

Chia’s underlying blockchain programming language Chialisp is also brand new.

Chialisp is a smart programming language based on the functional language Lisp, which integrates smart contract and smart transaction functions. Chialisp pursues security and simplicity in its design, is powerful, easy to audit, and secure. It supports atomic swaps, authorized payees, recoverable wallets, multi-signature wallets, and smart contract examples for price-limited wallets.

The second Filecoin?

Chia is not the first to use hard drives to mine. The currently recognized leader in this field is Filecoin, which launched on the mainnet in October last year. From the Flying Fox browser Filfox (Filecoin blockchain browser and data service platform), as of 0:00 on May 6, the real storage space of Filecoin’s entire network is 4.94 EB. At the same time, Chia’s data was 2.19EB, less than half of the former. However, Chia’s network storage space growth rate is still very high.

With hard drive speculation and high mining thresholds, is Chia a "green Bitcoin" or a speculative bubble? Chia network storage space and its trend data source: Chia explorer

In the same category of POC, what is the main difference between Chia and Filecoin, which has received much attention?

There is no penalty for Chia participants even if their computing power is lost due to disconnection, and there is no need to mortgage tokens before participating in mining. If investors want to participate in mining, they only need to configure simple equipment and download the mining applet on the official website. Filecoin has designed three penalty mechanisms-consensus penalty, storage penalty, and contract penalty, and it requires mortgage tokens. Even honest miners may be deducted from all mortgage tokens due to unstable hardware or network status. This leads to a relatively high risk for Filecoin miners.

Because of this, Chia is hailed as a cheap version of Filecoin by some people: the low technical threshold and low equipment configuration requirements greatly reduce Chia’s entry barrier. For investors who miss the opportunity to invest in Filecoin, placing a new bet on Chia may be another option.

In terms of application scenarios, Chia focuses on the financial field, aiming to develop functions suitable for banking, payment and financial applications, such as financial control, payment clearing and settlement, and the issuance of managed assets. The positioning of Filecoin is storage. Unlike Chia, which stores meaningless hash data, Filecoin stores valid files.

With hard drive speculation and high mining thresholds, is Chia a "green Bitcoin" or a speculative bubble? Comparison of the differences between Filecoin and Chia

Is Chia really “green”?

One of Chia’s vision is to solve the high energy consumption problem of Bitcoin. Chia advocates the main concept of green environmental protection. Whether it is from the direction of technological innovation, or from the following new words such as “farming” and “farmer”, you can feel Chia’s efforts in environmental protection. .

The gap between vision and reality: waste still exists

After all, there is still a certain gap between ideal and reality. Although Chia has made a lot of efforts in environmental protection, digging Chia is still wasteful. It’s just that mining Bitcoin costs electricity, while mining Chia costs hard drives and time.

In the P disk process before farming, a large amount of meaningless data needs to be written to the hard disk, which will greatly shorten the life of the hard disk, and it is as meaningless as Bitcoin’s ASIC chip. In comparison, Chia’s resource consumption is indeed much less than that of Bitcoin, but it is not as economical as the PoS mechanism adopted by ETH 2.0, and its meaningless hash data storage is not as meaningful as Filecoin’s file storage.

Chia’s original intention is to hope that users can use idle hard drives, which can involve commercial interests, and the end result is largely inevitable for capital to profit. There are still many ordinary players involved in mining, but almost no one really uses idle hard disks to participate in mining, so it is inevitable that the outcome of wasting high-performance hard disks. With the development of the Chia project, if capital heavily intervenes, the mining landscape may not be able to avoid the situation of specialization, agglomeration, and the departure of ordinary players. Chia still has to face the two eternal problems of waste and centralization.

Hard drives are hyped: resources, but also consumables

With the explosion of Chia, the price of hard drives has also been fired up. In late March, the hard disk price of Chia mining machines generally cost about 160-170 yuan per TiB, and the price of 1 TiB of Chia mining machines in the early days was mostly around 200 yuan. Up to now, due to the general increase in the prices of computing power machines, storage machines, and hard drives, the price of 1 TiB of many Chia mining machines has been pushed up to around 600-700 yuan. What followed was the overwhelming and hoarding of hard disks, monopoly problems in sales channels, and even various pits such as selling old disks when new disks were sold.

The sky-high price of hard drives has brought bubbles, and the barriers to entry have increased. The increasing participation costs have also made ordinary players daunting.

How many bubbles are there in XCH? What is the reasonable range of mining machine price?

Before the opening of the transfer transaction on May 4, the value of XCH can only be known through the over-the-counter price and the price of related derivatives.

From the beginning of March to the end of April, the OTC price of XCH has doubled about five times. Regarding the XCH futures price, you can see from the chart below that it showed a sharp upward trend before entering May. It reached a peak of RMB 12,884.3 on April 30. However, it began to fall continuously after entering May. It was down 54.7% the day before.

With hard drive speculation and high mining thresholds, is Chia a "green Bitcoin" or a speculative bubble? Comparison of XCH and BTC futures price trends Source: Mytoken

The price trend of XCH futures is similar to the price of hard drives, which experienced a roller coaster in April. After experiencing a surge in early and mid-April, it began to take a sharp turn in the latter part of the year.

The value of Chia mining machine is not worth the investment not only depends on the XCH OTC transaction price, but also depends on the cost of mining XCH.

According to the data provided by Chia explorer, it can be seen that the single-day single-day TiB coin production is showing a declining trend. The farming reward dropped from 0.0367XCH on April 13 to 0.0037XCH on May 6. The decline in farming rewards has led to a longer payback period for investors and increased risks.

With hard drive speculation and high mining thresholds, is Chia a "green Bitcoin" or a speculative bubble? The trend of single-day TiB coin production volume source: Chia explorer

Although Chia has been very popular recently and has a huge amount of traffic, the agency’s publicity is relatively conservative, and the head capital and media have not made much noise. It is not yet known how large the price risk of XCH is, and many exchanges are still on the sidelines. In the long run, Chia’s listing plan has brought a lot of transparency, control, and supervision to this Internet currency, and the expected currency price fluctuation risk has also been reduced.

Judging from the trading situation in only three days of launch, Chia’s expected earnings are not optimistic. The online price of Chia coin XCH was 2500USDT, and it began to plummet after it went online. As of 7:30 pm on May 6, Beijing time, the currency price reported 590.91UDST, a drop of more than 70%. However, the decline in XCH prices also indicates that hard disk prices will return to normal.

With hard drive speculation and high mining thresholds, is Chia a "green Bitcoin" or a speculative bubble? Source of XCH price trends: Chia explorer

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