- Chia is a Layer 1 cryptocurrency blockchain that focuses on key areas of customized throughput, security, regulatory compliance and sustainability.
- It works on the Proof-of-SpaceTime consensus mechanism, which consumes way less energy than PoW blockchains.
- XCH coin is the native crypto currency utilized on the network.
Chia is an open source Layer 1 blockchain ecosystem that aims to trump proof-of-work as well as proof-of-stake blockchains in terms of speed, security and environmental sustainability. It has developed a relatively new consensus mechanism that helps overcome certain limitations of PoW and PoS- proof-of-spacetime.
There are certain arguments against this mechanism due to hardware consumption. The company finds them refutable and sets plans for a wide utility blockchain that they like to call- an “everything blockchain”.
The Chia Ecosystem
Chia was launched as a cryptocurrency with a blockchain of its own, pioneering a specialized technique of proof-of-spacetime consensus mechanisms. It was founded in 2017 by the American computer programmer and founder of the peer-to-peer file sharing protocol BitTorrent. The project is backed by former NASDAQ (American stock exchange) CEO Gene Hoffman, who serves as the company’s CEO and president.
According to their official website, the company believes in developing a network based on three non-negotiable elements- security, compliance and sustainability. Interestingly, they have publicly announced that they intend to become a public reporting company, subject to the US Securities Act of 1934.
The company’s approach to public public-reporting is the polar opposite of other cryptocurrencies. The company reasons that compliance with the regulatory authorities is the only way to give the public protection against possible failures and foster an approved environment for widespread adoption of blockchains.
Consensus Mechanism
The consensus mechanism adopted by Chia is proof-of-spacetime, a relatively newer combination of proof-of-space and proof-of-time that the company has pioneered. They tout it as secure like PoW, green like PoS.” It fulfills the Nakamoto Consensus. The basic mechanism involves the usage of hardware, such as Hard Disc Drives (HDDs) and Enterprise-grade Solid State Drives, to fill in the storage space within set time intervals to ‘farm’ the Chia coin.
As opposed to using computing power, this consensus protocol is proposed as a solution to energy intensive Bitcoin mining. For this, the farmers have to do “plotting” on their storage drives by creating unique cryptographic data and utilizing the space on the drives to store it.
Each plot is then assigned a hash. Then a block is automatically generated by the network with a certain hash that will be compared with the hashes on the farmers’ drives. The farmer whose hash bears the closest resemblance to the block’s hash gets to add the hash and, hence, consensus is achieved. The farmer is then entitled to the block reward.
After this Proof-of-Space aspect, comes the proof-of-time aspect, in which a time needs to be elapsed before initiating the generation of the next block. It is implemented by a cryptographic method known as the Verifiable Delay Function (VDF) that is computed by a server known as ‘Timelord.’ It takes a certain amount of time to compute and then get verified. Once a timelord verifies the VDF, he moves the chain forward for the generation of the next block.
This proof-of-time element prevents block manipulation, plot redundancy and provides protection against a grinding attack. The size of a plot is generally around 110GB and requires a storage space of around 350GB to be computed.
Security and Scalability of the Blockchain
Chia boasts of having the most decentralized network in the world, with over 100,000 nodes across the globe securing the network. This ensures greater security and hack-proof transactions with a resilient validation protocol. Another security model is the Coin Sent Model, which is based on Bitcoin’s Unspent Transaction Output (UTXO). It requires solving a mathematical algorithm to use the coin. It’s a way to establish true ownership of the coin, thereby, securing each transaction.
It integrates smart contract functionality into the coin, facilitating further security. Each contract represents a smart contract corresponding to an unspent amount that will be spent only after solving the puzzle of the Coin Set Model. The language used to write smart contracts is a very secure Lisp programming language known as Chialisp.
Chialisp makes the smart contracts immune to attacks, as compared to the smart contracts on the Ethereum blockchain. It greatly enhances the interoperability of the blockchain. All of this is part of the network’s strategy to deliver on the promise of blockchains and cryptocurrency to create an “Internet-of-Markets”.
A prominent development that the company aspires to is listing itself as a security on the public exchange, with Chia shares available to be traded. Their aim is to register with the SEC, as per the US Securities Act of 1934 and then sell XCH tokens as part of the company’s shareholdings. This, they believe, is the most effective way to make XCH more adoptable and value generating for the general public.
Environmental Sustainability
The entire project is built upon the principle of making blockchains essentially carbon footprint generating. The consensus protocol of the network consumes less than 1% energy as compared to PoW blockchains. The focus is on giving proof enough space to store data rather than computing power at a wasteful expense of energy.
However, there’s an ongoing debate that there’s indirect energy consumption as storage space requires HDDs and SSDs, whose manufacturing power can be attributed to Chia’s demands. But it is still orders of magnitude less than other networks. Besides, the company also participates, via collaborations or contributions, in various Carbon offsetting projects to balance out blockchain’s energy burden.
XCH: The Chia Cryptocurrency
The Chia coin (XCH) is the native cryptocurrency of the network and can be used to pay transaction fees and earn block rewards. It can also be used in the liquidity pools of the network to generate passive income for the holders, aside from trading in the secondary market. The token also gives the right to govern the network to its validators. It has a limited total supply of 28,614,354 XCH.
At the time of writing the article, the price of XCH was $30.92, indicating a decrease of 2.01% over the past 24 hours, and the 24-hour trading volume was $4,202,639. With a current circulating supply of 7,614,354 XCH, its current market cap is $235,429,073.
