Most cryptocurrency miners have undoubtedly heard of Chia, one of the latest assets making headlines in the cryptocurrency industry. Chia is yet another Bitcoin rival that turned heads less so for its potential than for its impressive dislocation of the Asian hard drive market.
Indeed, Chia Network President Gene Hoffman confessed to having “destroyed the short-term supply chain” for HDD and SSDs as prospective farmers raced to get their hands on petabytes of storage before the token launch earlier this month. Prices for common hard drives rose as much as 50%. A month later, some 17 billion gigabytes of storage is now farming Chia.
For context, the average CD stores about 4.8 GB, or about 80 minutes of music. Led Zeppelin IV runs just shy of 42 minutes long, meaning Chia could currently host about 7.235 billion copies of that album.
Zooming out, Chia stands as yet another attempt to work around the work in Proof-of-Work. The creation of Bittorrent founder Bram Cohen, Chia argues its consensus mechanism has similar security guarantees to the Bitcoin blockchain without the ever marketed “wastefulness” of Bitcoin mining.
This piece is the first in a two part series on Chia, beginning with a survey of its Proof-of-Space and Time (PoST) consensus mechanism. A future article will examine security and decentralization guarantees pertaining to the three most common consensus mechanisms: Bitcoin’s PoW, Ethereum’s PoS and Chia’s PoST.
Chia farming (mining)
Similarly to how Bitcoin relies on the randomness of winning a block via hashing, or Proof-of-Stake (PoS) coins rely on distributed coin issuance, Chia relies on consumer computer storage hardware.
Farmers can earn Chia by downloading arbitrary data, called plots, to any hard drive over 108 GB in size. The tradeoff for earning Chia by farming is the loss of storage space on that hard drive.
Most computers have storage adequate enough to partake in farming, but it's unwise to use simple hardware as creating the digital farm can burn out a simpler hardware. According to Chia, the average startup cost for 1 plot is around $1,300 while the average monthly income is currently $12.71.
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The network awards coins by conducting periodic “challenges'' against anyone claiming to hold the data. The farmer then provides a hashed proof of passing the challenge.
The hash plus a timestamp provided by another network component – the verifiable delay function (VDF), which we will address later – puts a farmer into the lottery ring for a Chia token. The farmer whose hash meets certain criteria is selected to win the lottery. In this way, one farmer (one plot) has one vote. Currently, two Chia tokens (XCH) are created per block.
Chia's network security
Every consensus mechanism has tradeoffs and weak points, of which Proof-of-Space has many. However, Chia has integrated two elements to enable protection against two of the most nefarious: grinding and long range attacks.
The most common grinding attack is when an adversary continuously computes info pertaining to the tip of the blockchain until they can extend the next block over others. Networks which can be ground become beholden to the grinder.
In Chia, a few tricks are used to combat grinding:
- The data layer and consensus layer are separated, but connected per block by a unique private key. Chia claims the uniqueness of each sign off protects the underlying consensus layer from grinding.
- A time delay function (VDF) is infused into the consensus layer in between every Proof-of-Space.
The VDF acts as a checkpoint for the Chia network. It’s needed as an adversary wishing to conduct a deep hard fork on the network needs more than just a larger amount of space used for farming, but also must compute each VDF along the way.
And, by design, VDFs require resource intensive computation. A VDF is a function that takes a set amount of time to compute and cannot be parallelized. In fact, Chia expects ASICs to be created for VDF computation, although the network requires only a few VDF creators (called Time Lords) to run smoothly. Moreover, Time Lords earn no Chia for creating these proofs.
Better than Bitcoin?
The short answer: no. The long answer remains situated around what design goals an investor or user has for a blockchain-based money network.
In some sense, Chia’s consensus mechanism merely obfuscates the cost of real resources by moving costs from operational expenses to capital costs. Creating hard drives also costs real resources which is already being reflected in the mark up in HDD/SSD cards. It also remains to be tested over time.
Networks like Chia or Ethereum 2.0 may have novel consensus methods, but have yet to be proven to the same degree necessary for peer-to-peer money. Meanwhile, Bitcoin continues to run block-after-block, day-after-day, year-after-year.