Bitcoin consumes an estimated 102.72 terawatt-hours (TWh) of electricity per year equivalent to the energy consumption of Kazakhstan, a country of over 19.4 million people.
The high energy consumption is due to the Proof-of-Work consensus used to secure the Bitcoin blockchain and mine new BTC.
This computational power-intensive consensus is not eco-friendly as Bitcoin’s current carbon footprint (the amount of carbon dioxide released into the atmosphere) is 407.29 kilograms of Carbon dioxide per single transaction, equivalent to 67,881 hours of watching Youtube.
With the environmental impact of Bitcoin in mind, some innovators in the blockchain space have been exploring more eco-friendly alternatives to traditional mining methods.
One such notable project is Chia Network. Unlike Bitcoin’s energy-intensive Proof of Work consensus, Chia Network introduces a novel approach called Proof of Space and Time (PoST).
By utilizing unused hard drive space instead of vast computational power, Chia Network aims to reduce its carbon footprint significantly.
Source: Chia
This eco-friendly approach addresses the sustainability concerns surrounding cryptocurrency mining and opens up new possibilities for a greener blockchain ecosystem.
Now, let’s delve into what Chia Network is and how it operates with its innovative Proof of Space and Time mechanism.
What is Chia Network?
Source: Chia
Chia is a cryptocurrency and blockchain with smart contract capabilities, built on the first Nakamoto consensus algorithm since Proof-of-work known as Proof of Space and Time (PoST) which allow miners (farmers) to secure the network by allocating unused storage in their hard drives and earn block rewards in Chia (XCH).
Founded in 2017, Chia combines Proof of Space and Proof of Time to achieve efficient transaction validation with minimal energy consumption aiming to make the crypto space more environmentally friendly.
Founding Team and Investors
Chia Network was founded by Bram Cohen who is also the founder of the decentralized peer-2-peer file-sharing protocol BitTorrent. He is currently the chairman of the board and chief technology officer.
Also on the team are CEO and president Gene Hoffman co-founder and former CEO of the consumer subscription solution company Vindicia and chief financial officer Misha Graboi a former executive director at Goldman Sachs.
Together with the entire team, Chia Network is transforming blockchain with what they call their “3 non-negotiables”:
- Security – To Chia, this is synonymous with decentralisation the higher the number of nodes on the network the more decentralized the network is, which in turn leads to a more secure blockchain.
Chia claims to have over 100,000 nodes across 150 countries due to its relatively easy access i.e. anyone with space on their computer can farm(Chia’s version of mining) making Chia one of the most decentralized blockchain networks.
- Compliance – To Chia this means more protection for consumers, Chia believes in complying with regulations globally.
They are very confident that XCH (Chia’s native token) is not a security under the Howey test.
- Sustainability – Chia Network is leveraging the strengths of its inherently low power and reusable resource-based consensus mechanism to design a more sustainable blockchain, offering globally-inclusive access to those farming (Chia blockchain’s version of mining).
Source: chia
Chia mainnet was launched in March 2021, and Chia Network has its sights set on becoming a public for-profit, open-source company that aspires to be listed on the New York Stock Exchange or NASDAQ.
Hence, Chia did not have an initial coin offering (ICO) they secured funding by selling preferred stocks to several reputable investors such as Andreessen Horowitz, Richmond Global Ventures, Slow Ventures, True Ventures, Greylock, and DCM.
Chia Network called this method of funding “the tried-and-true method of Silicon Valley” where venture capitalists back startups on their way to becoming public.
Proof-of-Space and Time (PoST)
Source: Messari
Proof-of-Space enables farmers to show that they are allocating unused storage space on their hard disks to contribute to the network.
This unused disk space is harnessed and owners of the storage space are rewarded for “farming” new blocks.
Initially, a computational-intensive process called “Plotting” is required to create a Chia farm on your computer.
However, after plotting, the farming process becomes significantly less resource-intensive, with minimal impact on the user’s hardware.
Plots function as lottery tickets for block rewards. The more plots a farmer has, the higher their chances of winning Chia (XCH).
Proof of Time focuses on the duration a particular farmer has been actively contributing storage to the network.
This helps prevent attacks and ensures that farmers cannot simply create plots and immediately generate blocks, thus maintaining the integrity and security of the blockchain, therefore, helping to mitigate the attack vectors associated with Proof of Space.
Chia Network Utility
In addition to its environmental benefits, Chia (XCH) offers utility within the crypto space.
Similar to Ethereum and some other Layer-1 blockchains, Chia supports smart contracts written in its on-chain programming language called “Chalisp“.Chia claims that Chalisp is secure and easy to audit.
Some notable primitives of Chalisp include:
- Chia Asset Tokens (CATs) are fungible tokens following the CAT2 standard which is similar to the ERC-20 token standard in the Ethereum network.
- The creation of Non-Fungible Tokens (NFTs) on the Chia blockchain.
- Chia also enables Offers which are a way to enable peer-to-peer asset exchange on the Chia blockchain.
Decentralized exchanges leverage these Offers files to facilitate the trading of XCH and other Chia assets without an intermediary, counterparty risk, or exchange fees
See more primitives here.
Ecosystem and Top Protocols
Source: Chalink
The Chia ecosystem encompasses wallets, decentralized exchanges, pools, NFT marketplaces, explorers, and a growing community.
However, it is worth noting that many projects within the network currently lack visibility and active social media presence.
There is work to be done for the Chia Network team when it comes to attracting developers to build on the network and foster community engagement in the ecosystem.
Some of the notable protocols within the Chia Network ecosystem include:
- Pawket
Pawket is an open-source, secure Chia wallet that supports both online and offline scenarios. The wallet is optimized for both desktop and mobile.
Pawket lets you easily manage your assets on the Chia Blockchain.
- Hashgreen DEX
Hashgreen is a decentralized Chia token exchange. The platform enables users to exchange Chia (XCH) and Chia Asset Tokens (CATs) securely and anonymously.
Built by the recipients of the Chia Cultivation Grant, they deliver a familiar trading experience without holding your coins in custody.
- SpacePool
Source: SpacePool
SpacePool offers a service that normalizes the frequency of farming rewards. While it does not increase the potential profit, it increases the frequency of those rewards. SpacePool values transparency, privacy, and support.
87.5% of farming rewards belong to the pool, and the pool distributes this amount to farmers proportional to their contribution.
- MintGarden
Source: MintGarden
MintGarden is an NFT marketplace where NFTs on the Chia network can be traded.
Users can create and seamlessly mint single or bulk Chia NFTs directly to their wallets.
Users can also explore Chia NFT collections, connect with creators and collectors, and stay updated on on-chain activities.
Tokenomics
XCH (Chia) is the native coin of the Chia blockchain, the network did not have an Initial Coin Offering (ICO) and instead raised funding by selling preferred stock and pre-farmed 21 million XCH which they have in their strategic reserve.
Chia Network plans to have XCH on its balance sheet in case of a listing. Chia plans to utilize its strategic reserves in the following ways:
- Lending: Lending XCH coins to customers will create more liquidity for XCH.
- Rewards: To distribute additional farming rewards.
- Investments: Developers and other contributors to the network can be offered grants in XCH coin.
- Buyback Shares: Chia’s roadmap includes going public at some point down the line. When that happens, the team can use its strategic reserves to buy back shares.
- Dividends: XCH in its strategic reserves can also be used to pay dividends when the company goes public.
Just like Bitcoin, XCH follows a halving schedule when it comes to block rewards given to farmers for securing the network.
- 2021 to 2024: 2 XCH per block.
- 2025 to 2027: 1 XCH per block.
- 2028 to 2030: 0.5 XCH per block.
- 2031 to 2033: 0.25 XCH per block.
- After the start of 2034, 0.125 XCH is created in perpetuity.
Chia Network On-Chain Metrics
XCH does not have a maximum supply and it currently has a total supply of 28,843,165 XCH of which 7,843,932 XCH is its circulating supply. XCH is currently trading at $33.8 with a market cap of $265,429,026.
Source: coinmarketcap
XCH reached its all-time high of $1,559 on May 15th, 2021, but has since been plummeting, currently trading for $32.36 in July 2023.
Partnerships
In August 2022, Chia Network partnered with the IFC (International Finance Corporation), Cultivo and Aspiration to launch the Carbon Opportunities Fund.
The fund is a global investment platform that will raise private capital for an innovative model to source, tokenize and sell high-quality, verified carbon credits.
Carbon offsets are a means for companies to compensate for their emissions by purchasing credits that fund projects in tree planting or renewable energy.
On June 28th 2023, the first purchase of the tokenized carbon credit was made by Sumitomo Corporation of Americas on Chia Network as the tokens were minted in CATs(Chia Assets Tokens).
Source: coinmarketcap
This news had almost no impact on the price of XCH, as XCH was trading at $33 before the news broke, the token merely got to $34 after the news hit the market.
Additionally, Stably launched its USD-backed stablecoin on Chia in 2022 and introduced a Bitcoin and Ethereum bridge to the Chia ecosystem in 2023.
Closing Thought
Moving forward, there are currently no confirmed upgrades or updates on the Chia Network’s roadmap for the second half of 2023. However, numerous proposals are still under consideration.
Chia is essentially a decentralized blockchain that offers dApp capabilities with the Chialisp programming language. It sets itself apart with its energy-efficient approach to securing the network, making it more eco-friendly.
To learn more about Chia check out their Greenpaper and Business whitepaper.
Also Read: Could Fantom Be The Most Undervalued Layer 1?Â
[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]
Featured Image Credit: ChainDebrief
Author: Godwin Okhaifo
