A new crypto coin hit the market this week with promises of a greener, more energy-efficient currency than the likes of Bitcoin. However, it comes at a cost.
Chia (XCH) — created by BitTorrent founder Bram Cohen — began trading on Monday, May 3 and has already taken the crypto scene by storm.
What Is It Worth?
Unlike other coins like Bitcoin, Chia doesn’t have a hard cap on the amount of coins in circulation, instead opting for an inflation method.
“Being able to directly calculate a shared expectation of the total supply at any given time gives much the same financial and peace of mind benefit,” Chia’s white paper explains.
But similarly to Bitcoin, Chia Network (the parent company) holds 21 million XCH in reserve, which will allow them to hopefully avoid any major crashes and act as a security measure.
At the time of publishing, 1XCH is worth $AU832.32, with the value down 66.62% year-to-date.
How Is It Greener Than Bitcoin?
Unlike regular cryptocurrencies which “mine” the coin using “proof of work”, XCH “farms” using “proofs of space and time”. This means it is considerably less energy-intensive than Bitcoin, which has been accused of using as much energy to produce as some countries.
It’s all very convoluted, but to put it simply: Farmers (you) will seed their hard drive or solid-state drive (SSD) with the Chia software that puts numbers into plots, much like how a real farmer would plant crops.
From there, farmers are rewarded with blocks from the blockchain based on how much space their farm has comparatively to the network as a whole. The server (Timelord) then verifies everything and gives the farmer the relevant amount of XCH.
Meanwhile, Bitcoin (and other cryptos) use the proof of work (PoW) model. Basically, PoW systems require you to solve a highly complex mathematical problem that can realistically only be solved by trying every possible answer until you find the correct one. This is why crypto miners use super high-powered computers to do the leg-work for them.
The complex and energy-draining mathematical problems essentially serve as a protective barrier to stop people spamming the system to make a quick buck. Although they’re important, the PoW model is incredibly wasteful.
Can I Farm It Myself?
The major selling point for Chia is that it’s designed to be farmed at home.
“It is super simple. Just download the Mac or Windows version and double click,” CEO and President of Chia Network Gene Hoffman told CoinDesk. “I’m pretty sure this will be the easiest cryptocurrency to validate for normal people ever.”
Obviously, it’s worth evaluating if you can actually farm enough XCH to mitigate the costs of a beefy external hard drive (which can cost upwards of $500) before you invest. At this point, the coin could flop or fly, and your guess is as good as anybody’s when it comes to where it’ll end up.
When terms like “farming” are used, it can make this all seem like a fun game but it’s important to note that this is real money that you’re playing with and you should think through any decisions before you invest.
What’s The Drawback?
The proof of space and time system requires Chia farmers to have a specific amount of hard drive or SSD space at a given time, so while they don’t need enough energy to power a small country, they need a LOT of storage space.
Prior to its official launch, the Chia network’s storage space jumped to a whopping 1.14 Exabytes, which is the equivalent to 1,140,000TB, which is quite literally more than 1 million times the storage on most average computers.
As we’ve seen with other crypto crazes, people are quick to jump onboard in an effort to make a quick buck. So naturally, we’re already beginning to see storage shortages just days after the coin hit the market.
Following Chia’s debut, the price of hard drives in China has already skyrocketed, with the South China Morning Post reporting the price of 12tb hard drives have already increased by 59%.
Similarly, shoppers in Vietnam have seen shortages following the launch of Chia.
It doesn’t appear that shortages have occurred in Australia yet, but if the local crypto community follows what we’ve seen in China and Vietnam, we could potentially see shortages or price hikes for HDs and SSDs in the near future.
If Chia manages to catch on like other successful cryptocurrencies, it could put a significant strain on the hard drive and SSD market.