What is Chia Network (CHIA)?

What is Chia Network (CHIA)?

Chia NetworkCHIA) is a blockchain platform for creating and executing smart contracts written in a programming language Chialisp.

What problems does Chia Network solve?

According to the creators of the Chia Network, bitcoin mining is harmful to the environment and requires powerful computing resources that are inaccessible to most users (we analyzed the environmental problem in detail in an exclusive material).

Chia aims to address these issues by leveraging some of the key features of PoW blockchains in tandem with new technology solutions.

What does the name “Chia” mean?

Chia is positioned as a “green” cryptocurrency because its mining process uses energy-efficient hard drives and efficient solid state drives.

Emphasizing its “green” nature, the creators named the cryptocurrency after chia white (Spanish sage) – plants originally from Central America, which was the most important culture of the Aztecs. Chia seeds are superior in calcium to milk. In recent years, they have gained popularity among vegetarians in the US, and the EU has officially recognized chia as a “promising food”.

Who created Chia and when?

Chia was created by American programmer and founder of the BitTorrent network Bram Cohen. In August 2017, he registered a company in San Francisco Chia Network, which is developing the Chia blockchain. The president of the company is the former head of Nasdaq Gene Hoffman, the chief financial officer is the former head of Overstock, Mitch Edwards.

Since March 2018, the company has raised about $77 million in funding through agreements SAFE. The last round for $61 million ended in May 2021. The company was supported by venture funds Andreessen Horowitz, Galaxy Investment Group, DCM Ventures, True Ventures, Richmond Global Ventures and others. The company’s valuation during the funding round was $500 million.

Chia mainnet launch took place March 19, 2021.

On May 3, 2021, the developers activated transactions on the network. Chia has started trading on a number of exchanges.

How does Chia Network work?

The Chia blockchain uses a mining method based on Proof-of-Space (space proof) and Proof-of-Time (time proof).

The concept was presented in September 2017 by Bram Cohen and other researchers in the paper “Beyond Hellman’s Time-Memory Trade-Offs with Applications to Proofs of Space”.

They proposed a mining process using the computer’s disk space, and not its computing power. With this approach, the probability of mining a block is proportional to the amount of allocated space divided by the total network bandwidth. This method, according to the authors, is more environmentally friendly than Proof-of-Work, and more cost-effective.

The process of mining coins in Chia is called farming, and users who mine coins are farmers.

Farming consists of two stages: plotting And harvesting.

Plotting

With Proof-of-Space, the user confirms that there is free space on the computer’s hard drive. Plotting requires a high-performance drive – it is used as a buffer for temporary storage of information. The minimum buffer is an SSD larger than 356.5 GB. It is enough to “sow” the site [плота] 108.8 GB in size. Plotting time for one section takes from 4 to 12 hours.

The plotting process does not require an internet connection and consists of the following phases:

• seeding – generation of seven tables of cryptographic hashes and saving them on a temporary disk;

• gradient calculation [backpropagation] hashes;

• sorting and algorithmically compressing hashes in a temporary folder and starting to create the final file raft;

• completing the creation of the plot file and transferring it to disk space for further harvesting.

Harvesting

During the creation of the next block, the system announces a challenge (task), and the farmer scans his plot, finding a hash that is as close as possible to the task parameters. The chances of getting a block depend on the share of the farmer in the total space of the network.

This process is similar to a lottery – the block reward (for three years after the launch of the blockchain it is 64 XCH) is received by the first 32 farmers who provide a solution to the cryptographic problem.

The Proof-of-Time algorithm ensures the frequency of block generation and increases the security of the blockchain.

Proof of time is implemented by verifying nodes, the so-called time lords [timelords]using the checked delay function [Verifiable Delay Function, VDF]. This function takes a certain amount of time to calculate, but is very quickly verified. Verifiable latency minimizes power wastage and also eliminates the benefit of using multiple devices in parallel.

There will likely be relatively few “time lords”. The fastest one finishes first, and it only takes one fast and honest timelord to complete the block and move the chain forward.

Chialisp programming language

Chia Network uses a programming language Chialisp. The first version of Chialisp was released in 2019 and received high praise from the DeFi industry and developers.

Chialisp combines key elements of the Ethereum and Solidity codebase with Bitcoin Core and a model UTXO bitcoin. This approach allows transactions to be carried out in parallel rather than sequentially.

Chialisp recognizes coin IDs, which can also verify their IDs. This enables clear self-addressing and eliminates the need for self-reproducing programs.

According to the creators, the language is efficient, flexible and easily auditable. Chialisp is expected to allow developers to create a wide range of services on the Chia platform, including cross-border payments and the issuance of stablecoins. Atomic swaps, multisig wallets and “colored coins” are already available on the platform [colored coins].

Chia Token (XCH)

Chia (XCH) is a Chia Network utility token that uses an individualized Bitcoin UTXO model and is used to financially reward network members.

For the first three years, the block reward is 64 XCH for 32 farmers. The reward is halved every three years. This scheme operates for four three-year periods, after which the halving stops.

In the first three years, farmers will generate about 3.4 million XCH per year, the next three years – half as much, etc.

By the end of the sixth year after the launch of the main network, users will have 42% of the coins in their hands. It will take 21 years of farming for the number of coins on hand to equal the number of tokens in the strategic reserve.

strategic reserve

When launching the main network, the company created a strategic reserve (prefarm) to 21 million XCH. With the help of smart contracts, the vesting program will be implemented.

In the future, the company plans to enter the NYSE and NASDAQ stock exchanges. The shares will be used as ETFs pegged to the price of the token.

The distribution of funds among investors and users will be controlled by the governing council. The community will be notified about the sale of coins from the strategic reserve 90 days in advance. Employees and contractors of the company will not be able to receive payments in XCH tokens.

How does Chia develop?

The development of the project entailed a number of problems:

• Shortage: Back in April 2021, before the start of trading, Chia farmers created a local shortage of HDDs and SSDs in China.
• Rising hardware prices: In May 2021, Taiwanese company Phison Electronics warned of an upcoming increase in SSD prices due to the Chia mining hype. In May of the same year, due to increased demand for hard drives from Chia farmers, prices for models with more memory increased by several hundred dollars at American retailers.
• Restrictions on the sale and operation of equipment: In April 2021, the Chinese company Galax warned users that it will refuse warranty service for SSDs if they are used to mine Chia. At the same time, several Chinese manufacturers of solid state drives announced the release of specialized storage devices for cryptocurrency mining. The warranty period for them will be significantly shorter than usual. Chia farming is estimated to reduce the lifespan of a 512GB SSD from five years to two months.

Until the end of 2021, the company intends to conduct an initial public offering (IPO) that meets the requirements of the SEC, but also does not exclude the option of merging with another company – SPAC.