Musk: Here’s a Green Crypto for you!
Would Mr Musk back this crypto next? It’s green, after all!
The Crypto world is on fire. And like most of the times, this fire has been ignited by our beloved Mr Elon Musk. His one tweet has sent the value of the crypto market tumbling down the hole of despair. A whopping $365 bn was erased. All because of one tweet!
This tweet itself could be debated on several grounds. Why in the first place did Tesla even start accepting Bitcoins? A company that we trust to be the front-runner of innovation and tech would surely have known about the ‘environmental issues’ before they decided to accept Bitcoins, no? Is Musk acting in good faith? What could be his real intentions?
Well, today’s post is not to decode Musk’s erratic actions. Today, we will discuss solutions. Let’s explore a potentially green crypto, Chia, that could be a reply to Musk’s questions.
The world has as many as 4,501 cryptocurrencies. But, Chia has made quite the buzz. Not just because it claims to be the eco-friendly alternative to Bitcoin. But, also because Bram Cohen has created it. And Bram Cohen is no ordinary name. He is the inventor of BitTorrent, the technology that revolutionized file sharing in the early 2000s. If you have torrented movies in the pre-Netflix era, Bram Cohen is the person you want to thank for making your life wonderful.
In fact, because of his knowledge, many conspiracy theories suggest that he could very well be Satoshi Nakamoto, the creator of Bitcoin, whose true identity is unknown to the world. And, well…
He refuted the claims. Because, as per him “cryptocurrency should be easier to use than cash, harder to lose, and nearly impossible to steal. Anyone who wants to validate transactions should be able to farm without single-use hardware or a big electricity bill.” And so, he made the Chia Network.
The currency is absolutely new and has enabled transactions since 3 May 2021. It believes that its smaller carbon footprint will allow a user with an average PC to ‘mine’ the digital currency. How is it so confident? And, what problem of Bitcoin does Chia aim to solve?
To decode all of this, let’s first see how Bitcoin works.
Operating on a Blockchain, every transaction by Bitcoin is safe, secure and 100% transparent. Everything is recorded on the Blockchain - who held it first, who transferred it to whom, bla bla bla. But, this is no piece of cake. The behind-the-scenes of this whole system is not very easy.
Blockchain is basically a public ledger, consisting of many blocks. Every block consists of transactions. And, every transaction must be independently verified to be added on the Blockchain. This is where the process of mining steps into the picture. The miners verify a new transaction by solving complex cryptographic algorithms on their machines. And when we say complex, we mean really very complex (unlike our write-ups :P). So complex, that ordinary computers are simply not capable of solving them. They require high computational power, and thus, high amounts of electricity. Once the cryptographic algorithm has been solved, the transaction gets verified and is added to the Blockchain, and the miner gets Bitcoins as a reward for his efforts (proof-of-work).
Pretty simple? Uh-huh. Let’s go back to the last line there.
“The miner” gets the reward, not “miners”. Yes, it’s a competition between thousands and millions of miners, and it’s always the survival of the fittest. Except, in this case, it’s the best computer that wins.
The complex cryptographic algorithms are like puzzles, and the miners try to solve it using trial-and-error. The first one to crack the puzzle wins the jackpot (read: Bitcoin). And, how do you increase your chances of hitting this jackpot?
Simple. Buy a computer that can process millions of combinations per second. The more powerful hardware, the more is your chance of solving the puzzle. Hence, a miner has no incentive to reduce their electricity bill.
But, the more electricity consumed, the more the environment is depleted.
This whole process of verifying each transaction is called “Proof of Work”, where the winner “proves” his “work” (mining) by solving the cryptographic algorithm. Since, there’s only one winner, and thousands of runners, a lot of electricity gets wasted. In fact, the annual electricity consumption of Bitcoin is more than that of Norway or Bangladesh!
But, power consumption is not the only problem. There is a deeper, often overlooked problem, which potentially threatens the whole foundation of Blockchain.
The miners with powerful and expensive hardware will stand a chance to win the race. So, how do you think the smaller ones will compete? Isn’t this moving towards centralisation, where only a percentage of people control the mining process, and can potentially monopolise this space?
Enter, our hero: Chia, which aims to solve all these problems. Let’s see how.
Bram Cohen came up with Chia to develop a tech that saves resources, and at the same time, is decentralized. Instead of proof of work, the currency uses proof of “space and time”. (Tweet this)
In this system, users need to show that they have reserved some “space” on their hard drives for a period of “time”. No funds, special hardware, registration, or permission required to join. All you need is a hard drive. Your chance to win Chia is proportional to your allocated space. This allows almost anyone and everyone with an average PC to efficiently verify transactions on the Blockchain.
Chia likes to call it farming and not mining because of the ease with which crypto enthusiasts can ‘farm’ it, making it more viable than currencies that use ‘proof of work’ and are literally as tedious as ‘mining’.
To add to the hype, Amazon announced that Chia can easily be farmed through Amazon Web Services cloud servers, and integrating the Chia network on the servers can take as little as 5 minutes, which means farmers can get on with it swiftly. During its early days, Chia was backed by Naval Ravikant, who believes that Bram Cohen, the co-founder of Chia, is right up there with Satoshi (Founder- Bitcoin) and Vitalik (Founder- Ethereum).
Chia is currently priced at $1485 with a market cap of ~$766mn as we write this. It is currently unavailable on any Indian Crypto Exchanges, but it is planning to expand to major crypto exchanges soon.
Now, Chia also comes with its own set of problems. With a shift from powerful hardware to more storage space, the demand for hard drive storage space is bound to rise! Hard drive prices (12-terabyte drive prices have increased by 59%) in China have begun to soar as Chia miners stockpile storage.
So, what do you think? Will Chia become the next big thing? Probably the next Musk obsession? Or, will it join the ranks of other lesser-known cryptos? Let us know in the comments!
The study of blockchains and crypto-currency is too deep. You can check out the links below to understand Bitcoins and Chia Network in details:
https://docs.google.com/document/d/1tmRIb7lgi4QfKkNaxuKOBHRmwbVlGL4f7EsBDr_5xZE/edit#
https://www.coindesk.com/bram-cohen-getting-rich-is-a-terrible-metric-of-success
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