A new green eco-friendly cryptocurrency project Chia, led by BitTorrent (the first modern decentralized network protocol) creator Bram Cohen, aims to provide a green alternative to current mining practices. Chia focuses on decreasing the chance of centralisation through mining practices. The original version of this article by Delton Rhodes was published at CoinCentral.com.
Bitcoin and many other Proof of Work (PoW) cryptocurrencies require energy-intensive mining operations to reach distributed consensus. Since mining farms use large amounts of electricity, miners generally have to be located in places where energy prices are low enough to remain profitable. Miners also typically need access to cold air to keep mining rigs running at cooler temperatures.
These factors have lead miners to congregate in mining-friendly locations, creating a geographic disparities in the global concentration of mining power. In turn, these disparities have lead to a centralization of mining and its block rewards based on geographic location.
Chia hopes to solve this problem by getting rid of traditional PoW systems by making use of unused file storage space on computers. This could drastically change the way that mining pools operate by creating a trustless, decentralized system where no one has to worry about fellow miners stealing block rewards.
Most cryptocurrency projects rely on Initial Coin Offerings (ICOs) to raise money for project development. However, with a lack of legal framework in place, some cryptocurrency projects have abused this fundraising method. As it stands, projects face no legal responsibility for managing funds transparently.
Chia hopes to change this by utilizing a different fundraising structure. Instead of an ICO, it will offer a “mini-IPO,” which will show investors that it is committed (and legally obligated) to manage funds responsibly according to existing regulations.
Chia is planning a pre-mine of its currency; however, the project will initially retain ownership of 100 percent of its coins. While ICOs generally have a set price per coin, Chia hopes to raise $50 million by doing an auction-style bidding process. If the minimum price per coin investors are willing to pay rises, Chia will be able to hold on to more of the project’s equity.
This project is already investing heavily in hiring engineers well in advance of the mini-IPO. Chia has already established itself far beyond the theoretical foundation which most projects rely upon for convincing investors to take part in fundraising events.
As Cohen has stated, Chia doesn’t have a white paper and doesn’t necessarily need one. Instead, Cohen has stated that the project is well past the basic technical ideation phase. In fact, Chia actually has technical papers published in Asiacrypt’s refereed cryptography journal. This will help give the project much-needed legitimacy and help it win the approval of cryptography industry experts.
Many cryptocurrency projects are currently focused on increasing decentralization and security; however, few are tackling the issue of PoW’s high energy consumption. If Chia is able to offer a greener solution to cryptocurrency mining that is also more transparent for investors, it could quickly establish a popular model for more projects in the future.