An expert’s point of view on a current event.
Bitcoin, the first cryptocurrency, has a problem: It uses ghastly quantities of electricity and thus generates as much carbon emissions as a medium-sized country. This is by design. A new cryptocurrency, Chia, avoids this problem—in favor of creating huge amounts of a different kind of waste.
Bitcoin was meant to be decentralized so as to stay out of any central control. The “proof-of-work mining” process allocates fresh coins by a lottery. You enter this lottery by guessing numbers and running calculations on them as fast as possible—that is, you waste electricity to show your commitment. There is one winner every 10 minutes; as more people join the lottery, the guessing gets harder to stay at one winner every 10 minutes.
As long as people can make money wasting electricity, they’ll add more computing resources to win more bitcoins in an ever-escalating arms race. Bitcoin thus uses as much electricity as the Netherlands.
Proof of work has economies of scale: The bigger you are, the more efficiently you can create lottery tickets. Despite the grandiose claims of putting financial power in the public’s hands, bitcoin mining functionally centralized by 2014. The majority of bitcoin mining is three large pools. An electricity outage in one small area of Xinjiang in April 2021 took a quarter of all bitcoin mining offline. Bitcoin mining also uses specialized computers that just calculate cryptographic hashes as fast as possible; once the mining computers are obsolete, they’re just e-waste.
Other cryptocurrencies are similarly wasteful. Ethereum uses as much electricity as Peru. There are smaller cryptocurrencies that don’t use this process, but Bitcoin and Ethereum are the two cryptos that are widely exchangeable for actual money. Cryptos failed as usable currencies, so their only remaining use case is to be traded in the hope of actual money.
Bram Cohen is famed as the creator of the hugely popular BitTorrent file distribution protocol. Cohen turned his attention to the proof-of-work problem. He explicitly wanted a “green bitcoin,” so Chia, founded by Cohen, works very much like Bitcoin apart from proof of work. Chia’s business white paper advocates the same conspiracy theory economics that was embraced by the Bitcoin subculture: It assumes that governments fundamentally cannot be trusted to issue money and wasting a country’s worth of electricity is a better alternative.
The resource Cohen chose to use for his so-called green cryptocurrency, Chia, was computer hard disk space. This is a generic, reusable form of computer hardware, it’s widely available, and he thought this would use less electricity than proof of work. Cohen anticipated that casual Chia users could use “the unused storage of your laptop, desktop, or corporate network.”
To “farm” chia, the software writes a “plot,” a large chunk of cryptographic data, to the disk. The Chia blockchain software broadcasts a “challenge” every 18 seconds or so, 4,608 times a day; if you have a close enough answer to the challenge, you win two fresh chia tokens. As more disk space is added to the network, the challenges get harder.
Cohen’s company, Chia Network, secured venture capital funding in 2018 and developed the Chia software. The network was launched in March 2021, with the promise users could run it in a “normal apartment.” Chia’s business white paper assumes that hard disk space is “over-provisioned.” However, aspiring chia farmers bought hard disks in vast quantities, thousands of terabytes at a time—as they only had to spend less money than they expected to make back.
During the COVID-19 pandemic, manufacturing supply chains were already disrupted in multiple industries, leading to shortages of many basic components. By April, just a month after it was launched, chia farmers were straining…