ICO Analysis: Chia Network

It is a well-known fact that the mining required to run the Bitcoin network uses an enormous amount of electricity, even more than that some countries like Denmark use. Some parties argue that this is not environment-friendly and unsustainable, especially considering the danger of global warming. As a result, several cryptocurrency projects with greener mining solutions have been proposed.

On the other hand, some others point out that even more electricity is used to run the global banking and credit systems. Also, some defending Bitcoin state that this use of electricity is required to establish global decentralized trust and is definitely worth it.

But this is not the only problem that Bitcoin faces. The centralized nature of Bitcoin mining, controlled by a handful of people, is another established fact. As this allows them to get a high percentage of mining rewards, they are able to collect more and more Bitcoins and gain enough power to manipulate the price action to some degree.

Chia Network aims to solve these two problems by providing a green mining solution and by disincentivizing miners to form pools. Led by the inventor of BitTorrent, Bram Cohen, the Chia Network team is planning to implement proofs of space and time, replacing Bitcoin’s proof of work. Claimed to be less wasteful and more secure, the network will use unused storage space to verify its blockchain instead of ASIC-powered Bitcoin miners.

The problem of centralized mining will be tackled by a method similar to the blind distribution of mining rewards. As the team states, it is possible for anyone participating in a mining pool to receive the rewards without sharing them with the rest secretly, so miners are incentivized to conduct their operations on their own rather than in groups. Still, at least this does not seem like an ultimate solution to this problem of centralized mining since anyone with sufficient capital can buy, let us say, thousands of cheap devices capable of Chia mining and run his or her own pool. It also seems at least prima facie possible that third-party applications might go around, block any miner’s direct access to mining rewards and automatically distribute them to their wallets on a weekly basis.

Token

Chia Network will use its own native tokens, just like BTC in the Bitcoin network. Presented as a green-friendly alternative to Bitcoin, these tokens will be used to transfer value and conduct transactions.

No information on the token distribution or how the team is planning to use the token sale proceeds is made public as of the time of writing.

Team

CEO Bram Cohen: Cohen is the inventor of BitTorrent.

Advisors

Gene Hoffman: Hoffman was the chairman and the CEO at Vindicia.

Elizabeth Stark: Stark is the CEO at Lightning Labs.

Investors

Andreessen Horowitz: Andreessen Horowitz is a venture capital firm founded in 2009 by Ben Horowitz and Marc Andreessen.

Verdict

Below is a breakdown of the risks and growth potential of Chia Network.

Risks

  • According to the FAQ page, no code is written so far. (-1)
  • While the team is claiming Chia Network to be a better Bitcoin, the strongest point that Bitcoin has is that its security has been proven in the last ten years. It has no CEO and no company, thus no incentive to align its vision with investors. Although there are already many other cryptocurrencies with “better” code-bases, none of these have been able to present strong competition, so why should Chia Network be able to? (-1)
  • It is not clear that if Chia Network runs nodes many as Bitcoin does, it will be far more energy-efficient. In the absence of a high number of nodes, any blockchain project already spends way less energy than Bitcoin. (-1)
  • Although the project might disable miners to form pools, people with sufficient funds can run his or her own farm. It is also conceivable that by some external third-party application, miners’ direct access to rewards can be disabled and distributed automatically in predetermined bases. (-1)

Growth Potential

  • The project has already attracted great interest among venture capitals and in the media. (+3)
  • Chia Network has shown serious attention to disabling the centralized mining. Even if some loophole is found and abused, it should not take too long before the team comes up with a solution. (+2)
  • The project is led by the inventor of BitTorrent, Bram Cohen. It will be definitely interesting to see how a genius programmer’s approach to the cryptocurrency market will turn out. (+4)

Disposition

Although it is the most well-known cryptocurrency, Bitcoin faces at least two important problems. First, it is an established fact that running the Bitcoin network requires an enormous amount of electricity. Second, Bitcoin’s mining has become more and more centralized over time and quite a high percentage of mining has conducted by a few entities. Chia Network aims to tackle these issues by proposing novel solutions. By implementing a new mining method, proofs of space and time, instead of Bitcoin’s proof of work, the network is expected to have a more environment-friendly nature, consuming fewer resources while running. By a blind reward distribution method, forming mining pools is disincentivized as any participant can take the rewards secretly and run away. The project is led by a genius programmer, the inventor of BitTorrent, Bram Cohen. It will be definitely interesting to see how his approach will turn out. The project has already gained great interest among venture capitals and it is a reasonable assumption that with further development of the project, interest will  continue to increase. Still, the ICO investor should note that no code has written so far, which should be a concern. Although Chia Network is claiming to be a better Bitcoin, Bitcoin’s only strength isn’t its code, the fact that it was able to stand against any malicious attack in the last ten years is one of the main things that separates it from the crowd.

Chia Network receives a 5/10.

Investment Details

  • Type: Own – Native
  • Symbol: Unspecified
  • Platform: Unspecified
  • Crowdsale: 2019
  • Minimum Investment: Unspecified
  • Price: Unspecified
  • Hard Cap: Unspecified
  • Payments Accepted: Unspecified
  • Restricted from Participating: Unspecified

For More Information

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