Can one company build a better blockchain?
Estimated reading time: 10 minutes
Earlier this month, Tesla CEO Elon Musk made a splash (and briefly tanked Bitcoin’s price) when he announced that his company would no longer accept the popular cryptocurrency as tender for its electric cars. Why not? In a tweet, Musk shared that the company “is concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” Cryptocurrencies are “a good idea on many levels,” Musk’s tweet said, but “this cannot come at a great cost to the environment.”
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He’s right — traditional cryptocurrencies like Bitcoin are an environmental disaster. As of February of 2021, the BBC reported that the bitcoin network uses more electricity than the country of Argentina. The Sierra Club says that “Bitcoin produces 36.95 megatons of carbon dioxide (CO2) annually” and that “as digital currencies potentially continue to increase in popularity, their environmental impact should not be overlooked.”
Chiacoin, a new cryptocurrency that fully launched in May of 2021, aims to change the association between cryptocurrencies and environmental damage. According to Chia, the organization behind it, while traditional cryptocurrency requires “expensive single use hardware that consumes exorbitant amounts of electricity,” Chiacoin is “mitigating this problem through a fair, eco-friendly, and better blockchain.” In short, Chia sees Chiacoin as a greener (and potentially more secure) alternative to existing cryptocurrencies like Bitcoin.
Cryptocurrencies like Bitcoin rely on a system called “proof of work.” Users create new Bitcoins through a process called mining, in which computers work hard to solve extremely complex math problems. All this work is energy-intensive by design, which is why the Bitcoin network consumes so much power and why prominent crypto influencers like Musk are moving away from it.
Chiacoin works differently. Rather than relying on proof of work to verify blockchain transactions and create coins, Chiacoin uses a technique called “proof of space.” According to Chia, “Proof of Space is a cryptographic technique where provers show that they allocate unused hard drive space for storage space.” The details get technical, but essentially to create new Chiacoins, you don’t build a powerful mining computer and run it at full power 24/7. Instead, you connect up hard drives to a simple computer, pledge their space to the Chia network, and earn Chiacoins based on how much space you’ve pledged and the total amount of space on the overall Chia network.
Chia calls the process of creating new Chiacoins “farming.” (Chia’s name is inspired by the eponymous grain, and the network is shot-through with agriculture metaphors, as we’ll soon discover). Keeping drives spinning is a far less energy-intensive operation than running the complex video cards required for traditional mining, making Chiacoin potentially more environmentally friendly than other coins. And farming the coins is something you can do at home on nearly any computer, potentially making Chiacoin accessible to a much wider range of users.
To farm some Chiacoin, start by visiting Chia’s Github page and downloading the Chia blockchain software. You can install Chia’s blockchain on Windows, macOS, Linux, and several other platforms, but I’ll focus on the Windows version. I installed Chia on a dedicated PC I built specifically for cryptocurrency mining. Chiacoin is very new, so your Windows firewall or antivirus might flag it as a virus incorrectly — press “More Info” and “Run Anyway” to allow the program to run. I found that I needed to right-click on the installer and choose “Run as Administrator” in order to get it to install properly.
When you open the software, it will prompt you to create a new wallet to store any Chiacoins that you farm. The software provides you with a 24-word mnemonic you can use to recover your wallet if you ever lose access. Write these down in their precise order and don’t share your personal words with anyone else. I snapped a photo on my phone and stored it in a secure location.
Once the Chia blockchain software is installed and you have your wallet set up, the software will set about downloading the actual Chia blockchain in its entirety, which is necessary for farming. This is time-consuming — in my case, it took about four days to fully complete. You can monitor your progress under the “Full Node” tab — the “Peak Time” will slowly move closer to the current date and time as your computer syncs with the Chia network, and when it’s complete your status will change to “Synced.” Now you can begin to farm.
Your first order of business is the build some plots. Think of plots like the individual fields on an actual farm. Suppose you wanted to farm some rutabaga. You’d have to stake out a physical field on your farm, prepare the soil, and plant seeds. Likewise, in order to begin farming Chiacoin, you need to create and prepare some plots. Instead of physical fields, though, you’ll be creating plots on your computer’s hard drive. And instead of sprinkling rutabaga seeds, you’ll be sprinkling the unused space with special cryptographic hashes which connect it to the Chia network.
To create a new plot, make sure you have a hard drive with unused space ready. Open the “Plots” tab in the Chia blockchain software, and press “Add a Plot.” Select your plot size — nearly everyone selects k32 plots, which are 101.3 gigabytes in size. I opted for this standard size because selecting a bigger plot size doesn’t provide any benefits. You can also opt to create more than one plot at the same time — in this case, you should select the option to plot in parallel, which reduces the overall plotting time on compatible computers.
You’ll then be prompted to select both a final location for your plot, and a temporary location, which will be used as your plot is built. Your temporary location needs 239 gigabytes of free space for a k32 plot. To speed up the process of plotting, some people like to use a faster solid-state drive (SSD) for their temporary location and a traditional hard drive for their final location. Be warned, though — plotting requires lots of read and write operations, and Tom’s Guide reports that plotting can quickly destroy many consumer SSDs in a matter of weeks or months.
Using traditional hard drives will likely slow down your plotting time substantially, but your hardware will wear out much slower. I used the same drive for my temporary and final location. That’s not optimal, but it still worked fine for me. Creating a plot took me about 20 hours, which appears to be a reasonable time for hard drive plotting. Creating plots on an SSD can take as little as three to four hours. Plotting times reportedly increase by a few hours if you’re creating multiple plots in parallel. You can apparently create plots on one computer and then move the drive to another one, and professional Chia miners reportedly have separate, dedicated plotting and separate farming computers.
Once your plots are ready and connected to the Chia network, you’ve officially got a Chia farm. To farm your plots, keep the Chia blockchain software open and keep your computer powered on and connected to the internet. If you’re using Windows, you’ll want to disable sleep mode, ensuring that your computer remains on at all times. This will consume some electrical power but far less than if you used the computer for traditional mining. You can even farm Chia on extremely low-power hardware like a Raspberry Pi.
You can check the status of your Chia farm in the “Farm” tab of the blockchain software. The tab shows the total size of your plots, the total number of plots you’re farming, the total amount of space connected to the Chia network, and how much Chiacoin (abbreviated as XCH) you’ve earned. Earning Chiacoins happens through a process called “harvesting.” Again, the technical aspects get complex, but Chiacoins are created by the Chia network at regular intervals, and every active plot in the Chia network has a chance of receiving each coin created. In general, the more plots you have, the higher your chance of receiving a payout.
How much can you expect to earn by farming Chiacoin? That depends on the total size of the Chia network at a given point in time as well as the value of Chiacoins. As I write this, though, according to Chia Calculator, a single Chia plot is expected to earn about $0.12 per day, or $3.63 per month. A 10 terabyte hard drive filled with Chia plots would earn about $362.76 per month. That’s pretty good — given that a 10 terabyte drive currently costs about $283, you could expect to earn back the cost of a drive in about a month of farming. You’d still have to factor in the cost of electrical power, but again, power consumption for farming is way lower than for mining, making Chia farming potentially more profitable and greener.
That’s the good news. Here’s the bad news: The Chia network is already so big and there are so many plots attached to it that if you only have a few plots, you can expect to wait a long time to luck out and actually win a Chiacoin. And I mean a really long time — as I write this, a computer with one Chia plot would take an average of 42 years to receive a single Chiacoin. Of course, you could get extremely lucky, and one could be assigned to you sooner — I’ve heard of examples of farmers who have created a single plot and earned a Chiacoin by luck. But in general, you’ll need a lot of plots to have a good chance of winning coins and having your actual earnings approach your theoretical ones. A 10 terabyte set of plots, for example, would have about a 16% chance of winning a Chiacoin in a given month as I write this.
At the moment, then, luck plays a big factor in Chiacoin earnings. But that’s set to change soon. Most cryptocurrencies aren’t mined by solo operators but rather by large “pools” of miners who combine their resources, automatically distributing any coins earned to each operator in the pool. Official Chiacoin pools aren’t here yet, but Chia says they’ll be ready by the end of May 2021. At that point, Chia farming will be far more accessible and potentially more profitable to small farmers because luck will play a much smaller role in the overall harvesting process.
Unfortunately, Chia says that once pools are released, you’ll have to recreate your plots in order to participate. That means that if you’re reading this before pools go live, you might want to wait until they’re launched to start farming to avoid having to remake all your plots. Alternatively, you can dive in now and create some plots, learn about the network, and plan to redo your plots later when pooling launches (or continue to go solo if you’re feeling lucky or have a really big farm). I’m planning to create a 10-terabyte Chia farm and experiment with running it on solar power for added green benefits.
What’s the potential long-term impact of Chia? Proof of space (sometimes called proof of capacity) coins have existed in various forms for several years, but few appear to have the institutional backing (Chia has funding from venture capital giant Andreessen Horowitz, among others) or momentum of Chiacoin. Since its launch, Chia’s price has more than doubled, and Chiacoin farming is already driving up the price of hard drives. That’s no guarantee that these trends will continue or that Chiacoin won’t tank, of course, and “momentum” could just be another word for “hype.” But it’s definitely an indication that something about the eco-friendly coin has captured the crypto community’s imagination and that the environmental impact of cryptocurrency is very much on the radar.
Whether or not Chiacoin itself becomes the dominant green cryptocurrency, it’s becoming increasingly clear that proof of work coins have a too-high environmental impact and that their ecological costs need to be addressed. Other coin algorithms like proof of stake can greatly reduce the power cost of a coin network, too, and there are compelling efforts underway to mine traditional coins using renewable resources.
In the ongoing process of making crypto more environmentally friendly, though, Chiacoin is a fascinating step forward. You probably shouldn’t bet the farm on Chiacoin or plow all your savings into hard drives, just as it’s likely not a wise choice to devote yourself full time to growing rutabaga unless you really know what you’re doing.
But much as you might grow some veggies in the backyard for fun and to gain experience, there’s a lot to be said for creating your own Chiacoin “garden” to build your knowledge of the coin and experiment with new technology. Fire up an old computer, create a few plots, and see if anything of value grows.
Nothing in this article should be construed as providing investment advice. Consult your financial advisor or another professional advisor before investing in cryptocurrencies or any other monetary instrument.