5 Takeaways From Chia Network's New White Paper
Chia wants to make at-home mining cool again (or at least easy).
It will take 21 years for the rest of the world to mine as much of the Chia (XCH) cryptocurrency as the company behind it will have on the day its mainnet launches next month.
"We believe that chia, a new digital currency built on our new blockchain with radically different features and security than other digital currencies, will ultimately deliver on the promises of 'magic internet money,'" the company argues in its first version of a new business white paper released on Wednesday.
The size of the pre-mine is one notable revelation from the paper, in which Chia also announced its mainnet will launch on March 17 or earlier. Farmers (the network's equivalent of bitcoin miners) will be able to begin farming immediately. The network's cache of pre-mined XCH, however, will be governed using a traditional format: Chia plans to take its company public.
Chia was founded by Bram Cohen, the creator of BitTorrent, one of the most influential protocols on the internet. The company he founded was later sold to the Tron Foundation in 2018.
Chia first announced its intention to go public via the U.S. Securities and Exchange Commission's so-called mini-IPO in 2018, but the decentralized web startup Blockstack won out as the pioneer there, raising $23 million under Regulation A+ in 2019. Last year, Chia raised a fresh round of $5 million in funding led by Slow Ventures.
Plans have shifted slightly since then, with the company now planning to, one way or another, take its offering to a national stock exchange where it can be traded by the public and the company will be subject to the same transparency as any publicly traded company.
One of Chia's early backers was AngelList co-founder Naval Ravikant, who told CoinDesk in an email, "I backed Chia because I've known Bram for a long time and he is one of the greatest living protocol designers (BitTorrent), right up there with Satoshi and Vitalik."
Chia has previously articulated its technical vision, a consensus model called Proof of Space and Time (PoST). This new paper articulates Chia's vision for sustainability.
Chia's president and COO, Gene Hoffman, told CoinDesk that the public should control more XCH than the company much earlier than 21 years and that the token is not the critical component of the consensus model anyway.
"Unlike most projects, coin ownership has nothing to do with the protocol – this is not Proof of Stake," Hoffman explained via email. "The chart of ownership percentages of coins in the Whitepaper is a worst case as we expect to use shareholder distribution to migrate XCH out to a broad public shareholder base."
CoinDesk went through the new Chia white paper with a fine-tooth comb.
Here are five key takeaways from Chia's new roadmap.
1. The blockchain is designed to make home mining feasible again
PoST relies on loading up unused computer storage space with strings of digits that farmers (what Chia calls blockchain validators) allow to be loaded on their computers. The more space, the more strings, the greater their chance of winning a block.
"It is super simple. Just download the Machttps://download.chia.net/beta-1.27-macos/Chia-0.1.27.dmg or Windowshttps://download.chia.net/beta-1.27-win64/ChiaSetup-0.1.27.exe version and double click," Hoffman told CoinDesk. "I’m pretty sure this will be the easiest cryptocurrency to validate for normal people ever."
Other blockchains take a similar approach, such as Spacemesh. And Filecoin also seeks to capitalize on unused storage space.
In its testnet phases, Chia has reached as many as 1,700 nodes already, which is very likely to indicate something about interest in running a node when mainnet launches next month. Its public chat channel on Keybase has almost 4,000 people in it.
2. Chia favors predictable, continuous inflation over a hard cap
Bitcoin maxis fixate on the hard cap, but Chia argues that it's not a fixed amount that matters so much as a predictable amount. Chia has no cap, but it's also not going to surprise holders with unanticipated emissions.
"Being able to directly calculate a shared expectation of the total supply at any given time gives much the same financial and peace of mind benefit," the white paper argues.
As noted, the company will start the mainnet with 21 million XCH, a nod to bitcoin, and farmers can start earning it right away. While it will take 21 years for the supply to double via farming, Hoffman knows that it will be very close in only six years. Then emissions will slow down considerably under the halving schedule.
By then, it's likely that the company will have sold or airdropped a considerable amount of XCH.
3. Plans to embrace regulators, particularly by leading with a company that has public reporting requirements
"We have seen the scams and farces that have come before our project in this space and we will instead embrace the regulators," the white paper states. "It should not be controversial that investors deserve protection through public disclosure and certainly the public shouldn’t be sold investments without that legally required transparency."
By going with a public listing, Chia will essentially allow backers to treat its equity as an exchange-traded fund (ETF) for the XCH cryptocurrency. That's because the company's chief asset will be a considerable pre-mine (or pre-farm, in Chia lingo) of 21 million XCH that will be held for the company and is slated to be used for advancing the network.
"It’s owned by the company and subject to significant corporate controls that will only get more teeth as and when we go public," Hoffman said. The provisions the company is committed to require it to only use its stash of XCH in ways that benefit XCH holders.
"We can use the pre-farm to raise capital that only dilutes the shareholders and not the farmers," Hoffman noted.
4. The Chia blockchain has lots of native features that should make familiar crypto applications easier to trust and build
Chia comes with a number of features built in from the get-go that may increase trust and safety for users.
Here are a few described in the white paper that jumped out.
- Clawback escrow: "Withdrawal clawback escrow adds a time period in which the sender can claw back the funds after the initial transfer moves onto the blockchain."
- Slow paper wallet: "Slow paper wallets allow you to store a smart transaction that’s capable of starting a time delayed process to recover your funds in your hot wallet but it is not a duplicate of your private key."
- Colored coins: Ethereum's ERC-20 coins are what colored coins were back when they were still a concept. "Chia coloured coins can be used to create ephemeral value and thus applications on the Chia blockchain don’t generally require flash loans. This has been one of the achilles heels of DeFi on Ethereum."
Flash loans have been the key to attacks on decentralized finance projects such as bZx, Harvest and Yearn Finance.
5. Chia is skeptical about proof-of-stake's security against nation-states and other threats
"Their assumptions are inferior as they tend to cause centralization and are not as robust as Nakamoto consensus under international geopolitical pressure," the white paper says of proof-of-stake (PoS) blockchains (after dismissing private, permissioned blockchains out of hand).
The problem with proof-of-work (PoW), Chia contends, is that it burns too much energy. Nevertheless, Chia also writes in the new white paper that its technology complements bitcoin, the largest PoW network.
But PoS, which Ethereum is moving toward, is another matter. Chia does not think the safety of this model is adequate. The white paper contends, "A considerable amount of effort is being expended attempting to solve what we believe are intractable problems with Proof of Stake as an alternate strategy to use less electricity securing public blockchains."
It cites three key issues: centralization, where tokens tend to concentrate among a few giant holders; long-range attacks, where the history of the chain can be revised more easily than in PoW because there is no, well, work (to speak of) in PoS; and the inability of PoS networks to recover from a 51% attack.
It remains to be seen until there is real value on the line, but the hope is that PoST can lower the energy footprint of "magic internet money" without sacrificing the censorship resistance and decentralization that makes cryptocurrency so appealing to the cypherpunk-inclined and those dealing with unreliable nation-state currencies.
That's the long term.
In the immediate term, Chia aims to scale what's worked about crypto so far and build on it in a way that's accessible for everyone. The white paper states:
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