A new cryptocurrency claims to be an eco-friendly Bitcoin alternative. Is chia worth a look?
A new cryptocurrency that claims to be climate-friendly debuted in trading last week. The virtual coin, called chia and created by a platform called the Chia Network, advertises itself as “a ‘green,’ eco-friendly alternative” to Bitcoin.
Despite their astronomical recent performance, cryptocurrencies are lately coming under fire for their massive carbon footprints. “Mining” virtual coins such as Bitcoin and Ethereum uses tons of energy as the machines behind these networks churn away at solving equations. For miners’ efforts—that is, paying bills to operate powerful computers that confirm transactions on the blockchain, the distributed ledger technology underpinning cryptocurrencies—they receive coins as a reward. (The process is called “proof of work.”)
Chia presents an alternative to the status quo, relying on a process that it claims is far less energy-intensive than mining. The coin started trading on Monday at around $1,600 a pop and rose to as high as $1,934, but had sunk over 40% to roughly $1,060 as of Sunday afternoon, per Coinbase. Yet such slumps are part and parcel for the historically volatile digital assets.
“Crypto assets are going to continue to be volatile,” says Gil Luria, director of research at D.A. Davidson, who covers the likes of crypto exchange Coinbase. But he’s not surprised by chia’s green messaging: “There’s going to be some demand for that,” he tells Fortune.
Chia, trading as “XCH”, was conceived by BitTorrent founder Bram Cohen in 2017. Heavy-hitting investment firms like Andreessen Horowitz and Greylock Partners are backing Cohen’s project, according to its site. Instead of the energy-draining proof of work process used by the likes of Bitcoin, chia uses what it calls “proof of space and time.” The process uses unused storage space on hard drives as part of its method of verifying blockchain transactions. Instead of mining, chia calls its process “farming.”
Because of its unique technology, chia can be “farmed” easily at home (at least for now)—a big difference from the sprawling data centers that dominate Bitcoin mining. Interest in the coin has already prompted would-be miners to scoop up hard drives, even creating a shortage in Southeast Asia in the lead up to the coin’s trading launch.
‘Not a new effort’
The method isn’t totally green, of course. It still uses energy, but at lower rates than the likes of Bitcoin, Chia Network claims.
But chia’s process isn’t the only one that cuts down on energy usage and presents a possibly “greener” alternative. Another process, called “proof of stake,” has been gaining ground in recent years. Ethereum is planning in the coming months to switch its mining process over to proof of stake, wherein stakers—rather than miners—put up crypto holdings as collateral in order to secure a blockchain network, rather than by running energy-consuming computers.
Attempts to go green in the cryptocurrency industry are “not a new effort,” says Luria. Part of the reason there’s so much interest in proof of stake is due to “the big toll that proof of work takes both on the environment and on resources,” he says.
Some critics point out that chia’s mining (or “farming”) process still relies on hardware, and should the network become big, that could potentially undermine its energy-efficient value proposition.
“I do worry that when they do grow, this proof of space and time has kind of the same methodology [as] proof of work, like Bitcoin, and their model is: you ultimately have to buy more equipment to get paid,” says John Wu, president of Ava Labs, which has its own proof-of-stake blockchain platform, Avalanche. Wu notes that chia is, however, “probably, on a per unit basis, more efficient” than Bitcoin. (As for the company, Chia Network claims it expects the “farming will be more decentralized than Proof of Work or Proof of Stake and significantly less energy and resource intensive,” per their whitepaper.)
“Being more [environmentally-friendly] certainly could be something that would attract a certain part of the crypto community,” Luria suggests. But toppling Bitcoin and Ethereum’s longstanding supremacy, he argues, won’t be an easy feat for any up-and-coming coin.
Chia is but one of a cornucopia of cryptocurrencies popping up everywhere, and those like D.A. Davidson’s Luria believe “it’s quite possible that there will be many more crypto assets that add a unique value and will have some level of following.”
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