Have you heard of Chia Network – the protocol that is doubling down on Bitcoin, adopting its core principles, and implementing the new technology? Here you will find everything you need to know about it.
Chia Network (CHIA) is a decentralized blockchain-based platform created for developing and executing smart contracts. It deploys Chialisp, its custom-designed on-chain programming language. Launched in 2017, the protocol seeks to become an alternative to traditional networks. It strives to improve transaction speed, provide a secured energy-efficient network, and revolutionize the financial and payment system.
From Bitcoin to Chia
Bitcoin (BTC) paved the way for decentralized finance (DeFi) with its brilliant deployment of peer-to-peer (P2P) technology. However, not everything was perfect. Mining BTC requires high-power computing resources that only a few can afford. As a result, centralization and environmental contamination take place, causing a handful of concerns about its use.
Chia plans to solve these issues by adopting Bitcoin and proof-of-work (PoW) blockchains and implementing modern technology, improving some of the key aspects of it. Bitcoin served as an inspiration for Chia to work on a global open-source network that operates with a payment settlement system. It uses Proof of Space and Time (PoST) instead of proof-of-work (PoW), as well as Chialisp, its own custom-designed language.
Chia Network’s Team
Bram Cohen created Chia back in 2017. Notably, he is known as a founder of BitTorrent, a software protocol for peer-to-peer transfers. The protocol’s current executives are former Nasdaq CEO Gene Hoffman (he is Chia’s Chief Operating Officer and president) and former CEO of Overstock.com Mitch Edwards (Chief Financial Officer at Chia).
The protocol welcomes a broad community of developers to contribute in many aspects to the codebase in areas such as research, development, testing, documentation, and peer reviews. It also counts with many investors, including Andreessen Horowitz, MetaStable, and Galaxy Investment Group.
Chia’s Underlying Technology
The protocol has an innovative approach and uses a so-called “Nakamoto consensus”. This algorithm removes the energy demands from the system providing a far more decentralized platform, ensuring it remains far more secure than other projects. This new Nakamoto algorithm is a combination of Proof of Space and Proof of Time.
Proof of Space is a cryptographic technique to prove that miners (called farmers) are keeping unused storage on their hard disk drives. Meanwhile, the Proof of Time consensus algorithm ensures that block periods have consistency in the time between them to increase the security of the network. Chia ties Proof of Space with Proof of Time.
Firstly, farmers have to install special software on their computers in order to allocate free space on their hard disk. Farmers then use the amount of memory or disk space to solve a challenge presented by the protocol.
The software stores a collection of cryptographic numbers on the disk into “plots”. When a block is created on the blockchain, a challenge number is derived from the previous block. Miners will have to scan their plots to see if they have a number that is close to this challenge number. Farmers receive rewards for creating new blocks.
Notably, PoST does not require the amount of electricity and hardware that PoW does. Besides, unused space is ASIC-resistant (meaning, it is immune to ASIC mining), irrelevant to electricity prices. Therefore, Chia’s blockchain pledges to be a green, eco-friendly alternative.
Further, Chia employs Chialisp. This is an on-chain blockchain programming language that allows the development and execution of funds with smart contract capabilities. The first version of Chialisp launched in 2019. It was well-received by the DeFi community and developers for allowing a better method of building smart transactions.
The key aspects of Chialisp are as follows:
- The program takes the most important components of the Ethereum (ETH) codebase, Solidity, and the Bitcoin core, keeping BTC’s UTXO model and maintaining Solidity’s expressive power.
- This approach allows simultaneous transactions rather than sequential, without side effects, which also provides delegation in a more powerful way than the BTC Core.
- The language detects coin IDs, and these coins can assert their own IDs as well. This allows explicit self-reference and avoids the need for quines, which are, in computability theory and computer science, self-replicating programs.
Chia Token (XCH)
Chia Network has its own CHIA (XCH) token. The protocol’s utility token uses a custom-designed version of BTC’s unspent transaction outputs (UTXO) model, and it is the main incentive mechanism to support the Nakamoto algorithm.
On May 3, 2021, Chia coin debuted on exchanges, going live for trading at the listing price of $1600. Crypto exchange OKEx was the first to announce the listing of XCH on its network.
The protocol rewards block producers to ensure the protocol’s financial security. Farmers can contribute resources to the network and earn freshly minted XCH. Farming rewards mint new XCH, minting two new XCH every block for the first three years.
Chia manages its treasury following its Strategic Reserve. It allocated 21 million XCH in the “pre-farm” process to fund blockchain development and spread further adoption. Users, farmers, and developers are able to own a portion of the treasury as a shareholder under US laws of the equity market.
Governance
Node operators have control of the future changes of the Chia protocol. Protocol changes are validated and approved if the majority of users agree to those changes. Chia nodes can adopt new rules depending on their views on how the network should work.
Unlike other protocols with proof-of-stake consensus, the amount of XCH owned by users does not influence the governance of the protocol. Only independent running nodes can upgrade the blockchain to a new version.
Chia’s Advantages Over Other Blockchains
In comparison with other blockchains, Chia greatly reduces energy usage and environmental contamination with Nakamoto consensus. This algorithm is the PoST consensus, which is a hybrid model between the most essential aspects of Ethereum and Bitcoin.
Instead of using high-power computing resources, which can end in the centralization of the network, farmers can allocate computing power into the network and prove they are leaving storage unused on their hard drives.
Conclusion
Chia is doubling down on Bitcoin, adopting its core principles and implementing the new technology. It also attempts to improve PoW-based blockchain with its new Nakamoto consensus. Without consuming massive amounts of electricity and wasteful single-purpose hardware to validate transitions, Chia Network proves to be an eco-friendly platform.
The protocol expects to scale out a global open-source system that supports businesses, institutions, corporations, and governments worldwide. It is also working to bring liquidity pools to the system, as well as lend XCH to use it for commerce and trading.