Some of the bitcoin community’s most experienced developers are creating a more eco-friendly type of cryptocurrency. There’s no word yet if the new San Francisco-based startup, Chia Network, will launch the chia token in 2018 with an initial coin offering. Regardless, chia will be anything but typical. It could even offer a revolutionary model for upholding bitcoin’s original ideals.
Bitcoin was designed to give people financial sovereignty with a system that doesn't rely on governments, banks or other institutions. However, the truth is businesses still wield considerable influence because it is very expensive to participate in some aspects of the network. Mining, where people contribute computing power in exchange for newly minted bitcoins, has become particularly difficult.
First of all, the Chinese company Bitmain has cornered the market for mining hardware, especially ASICS chips. Once a newbie miner buys or jerry-rigs the equipment, it is prohibitively expensive to use. Motherboard reported a single bitcoin transaction now requires enough electricity to power an average American household for a week. “Running a miner in your house doesn’t make any sense,” Chia Network co-founder Bram Cohen told International Business Times. "The retail cost of electricity is so high that your rewards will be less than you spend on electricity.”
Even though there are only around 293,000 bitcoin transactions per day, cryptocurrency analyst Alex de Vries estimated bitcoin transactions now account for 0.12 percent of the world’s electricity consumption. The bitcoin network’s carbon footprint grows steadily along with its popularity. So Cohen, best known for inventing the popular peer-to-peer file sharing protocol BitTorrent, wants to experiment with bitcoin mining’s underlying workflow called proof of work.
“In exchange for making this new [bitcoin] block, they [miners] get mining rewards...your chances of being the one to get the rewards are directly proportional to the amount of work you put into it,” Cohen said. “When miners are running, they are basically computers that are printing lottery tickets. As soon as someone prints a lottery ticket, they win.”
That’s why industrial mining pools now dominate the bitcoin network. They are flooding the system with so many metaphorical lottery tickets that individual miners hardly have a chance of getting the prize bitcoins. De Vries’ research estimates the global mining industry generates $6.2 billion in annual revenues. “It’s not really a level playing field,” Cohen said. “Whoever has the cheapest electricity ends up winning in the end.”
The Bitcoin Gold fork in October also aimed to curb corporate dominance in bitcoin mining. The amount of work isn't measured by watts or joules. It's actually about the number of hashing operations, complex algorithms that coincidentally take a lot of computing power. Instead of instigating yet another network fork, chia will launch a new token fueled by an entirely different process called proof of space.
“We’re calling it farming instead of mining because it’s greener,” Cohen said. “You don’t need lots of power in order to farm with proof of space.” Several other bitcoin veterans have experimented with this subversion before, including computer science professor Krzysztof Pietrzak from the Institute of Science and Technology Austria. Pietrzak and Lightning Labs CEO Elizabeth Stark are two of the blockchain stars among Chia’s advisors.
Farming doesn’t require ASICS hardware at all. You could theoretically do it with a regular laptop. “It’s able to leverage the unutilized storage capacity that you have, in a way where your actual file system doesn’t even notice that it’s going on,” Cohen said. “The rewards are directly proportional to the amount of resources that you put in. If you have 10 times as much space, you get 10 times the reward. But the person who puts in one tenth still gets a reward.”
Once the network is up and running next year, the goal is to eventually implement Lightening Network channels for faster and easier transactions. A few subtle tweaks to bitcoin’s foundations will also make it easier for chia tokens to work directly with smart contracts. “You can build things that actually look like normal banking on top of it, so you can use it for commerce,” Cohen said. "That can then scale globally.”