Widely touted as a potential Bitcoin killer (there were plenty before and will be many after) ‘Chia’ is one of the Bitcoin clones that has garnered a lot of attention, for all the right reasons. Founded by Bram Cohen, whose previous stint as an entrepreneur resulted in BitTorrent - one of the biggest p2p file transfer and torrenting websites in the world that was since acquired by the team behind the cryptocurrency TRON - the Chia project has pulled in funding from some of the leading figures in the industry, including Naval Ravikant, a16z and Greylock. This novel projects aims to tackle a longstanding and increasingly more disconcerting problem of electricity consumption by Bitcoin. The standard response to questions around the massive amounts of BTC electricity (rumored to be as much as that of Ireland or Denmark on a daily basis) consumed have been around two broad themes;
- The ‘pseudo-equivalence’ defence - Yes, BTC uses energy for its Proof-of-Work, but the system that it intends to replace, the banks, the accountants, the payment systems, all the traditional ‘trust-validators’ use far more energy that are relevant in comparison. This one sort of makes sense, but is not quite apples-to-apples; For any sort of mass replacement through industry adoption at levels that being to register, BTC will have to start scaling to at least 10,000 TPS (transactions per second), around the same range as mastercard transaction levels currently; At this point, electricity costs incurred in mining will likely be through the roof. This is ceterus paribus of course, without accounting for large scale scaling improvements through Lightning network and other Phase 2 solutions.
- The ‘false appropriation’ defence - Bitcoin mining is forcing miners to search for greener sources of energy. That is like saying Jose Mourinho’s two-and-a-half year hotel bill is the cause behind his sacking by Manchester United! There is a broader problem with energy and sustainability and global warming that goes beyond the bitcoin debate, and there will continued efforts to find greener sources of energy.
To get around the consumption of inordinate amounts of electricity, as is the case for Bitcoin, Chia uses a new and untested consensus algorithm called “Proof of Space” mining, which uses free hard disk space to mine new blocks. The underlying thesis is that there’s a lot of underutilized hard disk space in the world and the excess capacity can be channeled towards mining Chia without the need for investing in energy-guzzling infrastructure. However, the zero cost of mining presents several other challenges such as certain kinds of attacks that can be made at zero cost as well, and it remains to be seen what the protocol has in its roadmap to address these critical issues.
Unlike Polkadot and Dfinity and Tezos and all the potential ‘Ethereum killers out’ there that necessarily have to, almost by default, promise a gazillion transactions per second
, basically promising to beat Ethereum on scalability, we like the fact that Chia is instead focusing on making a better bitcoin, as ambitious as that sounds. Who will want to say no to saving the polar bears!
Chia’s launch was initially scheduled to happen by the end of 2018, but the project is facing some delays and is expected to launch in 2019. While Chia aims to retain all the properties of Bitcoin minus the massive energy consumption, it will be interesting to see if the project will be able to wean ideological Bitcoin core supporters away from Bitcoin. It will definitely be an uphill climb, as we observed earlier in out post on evolving crypto market structures
, but the problem at hand, a green bitcoin, is definitely attractive enough and merits closer study.
Also, as a reminder or in case you are stopping by after a while; Do not forget to check out our popular 2018 in review/lookback series. The most recent one we did were on crypto regulation
, and on security tokens