Bitcoin may have reached its peak network capability without needing a big change. As more transactions occur on the Bitcoin network, users are starting to shell out more money for transaction fees. As transaction fees continue to increase, the advantage of using Bitcoin for its original purpose as a peer-to-peer electronic cash is quickly diminishing. In addition, Bitcoin is not the best product when thinking in terms of being eco friendly. Bitcoin mining currently is estimated to use 30.14TWh a year, which exceeds the use of 19 European countries. The majority of mining occurs in China, due to cheap electricity. This cheap electricity comes at a cost; to create this cheap electricity China burns coal, which in turn adds an excess of CO2 into the atmosphere. On the other hand, Visa operates two US data centres which supposedly runs on 2% of the power needed to run Bitcoin. Yet Visa, can conduct around 200m transactions a day, while the Bitcoin network struggles to handle fewer than 350,000. Since the proof of work (PoW) system requires a great deal of work on the miners side to verify transactions and add them to the blockchain, it becomes an inefficient way to verify transactions when compared to more efficient systems such as proof of stake (PoS) or proof of space(PoSpace). The major downside of PoS systems is that it helps the richer get richer while the poor remain poor. Accordingly, PoSpace may be one of the few project that contribute a part of the solution to the three issues that all cryptocurrencies try to solve at a fundamental level security, speed, and scalability. Chia network is a project that is developing PoSpace that may be the new underlying technology of every major cryptocurrency in the distant future.
Chia network has spawned from the need of a better way for transactions to be validated before being added to the blockchain. As described before, PoS mining helps the richer get richer while the poor remain. Even though coins/tokens are selected at random to verify transactions, to verify a block a significant amount of tokens will be needed. Instead of implementing the age old PoW or the new PoS mining solutions, Chia network will create and implement PoSpace, a new verification system that will allow anybody to mine adding blocks to their blockchain. By moving to a system that anybody can mine with no costs and no asics miners, the PoSpace will be able to cut the electricity cost to mine cryptocurrencies.
Chia, instead of using proof of work, like Bitcoin and Ethereum, solves security concerns in proof of space by supplementing its blockchain verification with proofs of time. A proof of space demonstrates that an amount of space is allocated to a task by answering queries at low latency and amortized cost. A proof of time, or more accurately “Verifiable Delay Algorithm”, is a special type of proof of work which take a specified number of iterations. Iterations can be accelerated, but calculation can’t be parallelized across iterations. Output should be quickly verifiable allowing any two parties who do the calculation to get the same result, ensuring that the output hasn’t been modified in any way. This allows the output of the proof of time for one block to be used as the challenge for the proof of space in the next block. Simply put, each block starts with a proof of space and is finalized with a proof of time. The product of the quality of the two of them must meet the current work difficulty threshold. This ensures that a block is a block, with no blocks worth more than others, disincentivizing farmers to farm orphan blocks in the hope of catching up. By implementing both proof of space and proof of time Chia will be able to achieve the same level of security while using less electricity. Full nodes in the Chia network will all keep the full history and a set of pending transactions. They then propagate the three weightiest histories they know of to all of their peers. When a new block is is minted it propagates rapidly to all full nodes while farmers start working on top of it. When a new block is found the farmer publishes it to the network. In exchange for finding a block a farmer will be rewarded with farmer rewards and transaction fees for all transactions they include. Once the three best proofs of space are propagated across the network rapidly, the proof of time servers start working on top of them. After the proof of time server finishes the proof of time for a proof of space it publishes the whole thing as a fully validated block and publishes it to the network to be built on top of again. The are always time/space trade offs because space can be repeatedly reformatted with new proofs, the goal is to make that be the best tradeoff possible.
Unlike Bitcoin, Ethereum and other major cryptocurrencies the Chia network uses vacant disk space on hard drive to farm seeds (PoSpace). The goal is to prevent wasting massive amounts of energy securing the network and prevent ASICpowered centralisation. A hard disk will have empty space filled with randomly generated proofs. Farming (Chia’s form of mining) works by taking a snapshot (seeding) of the storage available on your hard drive(s). Based on the storage as a percentage, based on the storage available on the network, you will be given lottery type payouts for the amount you are willing to farm. There is no incentive to buy hard drives to farm Chia, as Chia works because of the amount of idle space sitting around at the moment not costing owners anything. Considering the insignificant energy, bandwidth and that the space is idle anyway, it’s not a big deal if your reward is small and infrequent.
Chia network plans to release the initial launch of the network by the end of 2018, but is not set in stone and is dependent on development. No code has been written yet ,but a bunch of mathematical primitives have been worked out and are working their way towards publication.
A great application that will be able to be built into the Chia network is file storage. As farming occurs on unused hard drive file storage would be ideal. For a farmer to mine the minimum requirement of free space will be around 100GB or 1TB allowing users of the network store their data with knowledge that it would be safely stored in the blockchain. Also by distributing their data users will be able to have faster access and data will be more secure than storing in a centralized server.
Chia network is still building a team, but is led by BitTorrent inventor Bram Cohen. Bram invented torrenting in the early 2000s and briefly worked on Steam for Valve. He has already teamed up with early Bitcoin exchange Tradehill’s COO Ryan Singer. Together they have already raised a seed round so that they can ramp up hiring. The figure they raised is still unknown but early sales of Chia are set to happen sometime in Q2 2018. Chia, has been staying out of media attention after being announced in early November of last year. They are focusing on the research and developing the underlying technology with the goal of launching the network by the end of 2018.
Chia has an immense amount of potential as businesses and governments are looking how to implement cryptocurrencies into their daily actions and processes. Interest in Bitcoin has surged since last year, causing heavy network congestion and miners working harder. If recent rumors about the Chinese government deciding to ban cryptocurrency mining are true Bitcoin and other cryptocurrencies that depend on PoW will be doomed. Additionally, if Bitcoin wants to scale it will continue to use more energy which will upset governments resulting in strict mining regulations or worse prohibition. PoS mining will take off because it will cut energy use for most cryptocurrencies, but will be opposed from the general public as it will centralize the cryptocurrency while making the wealthy, wealthier. Chia will be able to cut out the majority of inadequacies of Bitcoin and other cryptocurrencies while allowing Chia to strive. All things considered, there may be a bright future ahead for Chia Network. Whether or not this currency can become any sort of threat to Bitcoin remains a big question, but the fact is that Chia is definitely a greener option.