In-depth analysis of the popular project Chia Network

1. Project Introduction

Chia Network is a cryptocurrency project founded by BitTorrent founder Bram Cohen in 2017. It is positioned as a green and environmentally friendly cryptocurrency. It also stated that it would develop an improved blockchain and smart trading platform and deploy enterprise-level applications.

Chia has developed its own smart contract programming language Chialisp. Its biggest advantage is that it retains the "UTXO model" while adding the general functions of the "Ethereum Solidity model", thereby achieving more powerful functions, such as multi-signature and atomic swaps, authorized payee wallets, transfer recovery, limit wallets, paper wallets with delayed recovery functions, digital identity wallets, and Chia Color Coins (equivalent to ERC20).

Unlike Bitcoin and Ethereum, Chia is a "dual-coin-stock architecture". In addition to the decentralized blockchain network Chia Network, there is also a centralized for-profit company Chia Network Inc., which was registered in Delaware on August 1, 2017 and was founded by Bram Cohen, the inventor of BitTorrent. There are currently 21 full-time employees and full-time equivalent contractors, as well as 15 part-time consultants. 16 employees are mainly focused on research and development activities, and 5 employees/contractors are focused on the company's management and implementation of its business plan. The company has a clear plan to go public in the United States.

On March 18, 2021, Chia officially released the Chia 1.0 mainnet. The token is XCH, and mining (farm) activities have been opened.

2. Consensus Mechanism

Chia Network’s blockchain relies on a new Nakamoto consensus algorithm called Proof of Space and Proof of Time.

Proof of Space: Think of proof of space as a way to prove that you are not using some storage on your hard drive. Users of the Chia blockchain will "seed" (plot) unused space on their hard drives by installing software that stores a set of encrypted numbers on the disk as a "password". These users are called "farmers". When the blockchain broadcasts the challenge for the next block, farmers can scan their plots to see if they have the closest hash to the challenge. The probability of a farmer winning a plot is the percentage of the total space that the farmer holds across the entire network.

Proof of Time: Proof of Time is achieved with a verifiable delay function that takes a fixed amount of time to compute but is fast to verify. The key idea of ​​VDFs is that they need to be computed sequentially, and since having many parallel machines does not yield any benefit, this minimizes the waste of electricity. There can be relatively few VDF servers ("Timelords"), since the fastest ones will always come first, and it only takes one fast and fair Timelord on the network to finalize a block and move the chain forward.

In order to mine Chia, you first need to create one or more "plots", which are files that take up space on your hard drive, a process known as "P-disk".

The space used by the plot is denoted by the letter k. Creating a plot takes some time and CPU power. The larger the value of k, the larger the plot and the longer it takes to create. Once the plot is created, there is no difference between one k and another except for the file size.

Plots can be moved from one machine to another without any restrictions. Some people build dedicated plotting machines that are optimized to perform the plotting process quickly and then move the plots to less powerful machines for acquisition.

Like Bitcoin, the difficulty of work on the Chia network's blockchain is also dynamically adjusted, so the target time for 32 blocks to be completed is an average of 10 minutes. Not every block is a transaction block, and it is expected that there will be 9 to 14 transaction blocks every 10 minutes. Transaction blocks will have transaction fee income.

Token Model

Pre-mining: 21 million, as strategic reserve (controlled by the board of directors)

Total amount: No upper limit

Halving rule: 64 XCH will be released every 10 minutes initially, which will be halved every 3 years. After it is reduced to 4 XCH every 10 minutes (in the 13th year), it will remain unchanged.

Mining will start on March 18 when the mainnet goes online. Trading will not be possible in the first 6 weeks, and transfers will be possible on April 29. By then, there will be about 390,000 XCH in circulation.

IV. Board of Directors and Strategic Reserves

According to the Chia business white paper, 21 million XCH tokens will be controlled by the company's board of directors as a strategic reserve. "We intend to have a 5-member board of directors consisting of 3 external directors. Currently, our board of directors consists of three members: Bram Cohen, Gene Hoffman, and Chuck Stoops (independent director)."

Chia explained the purpose of the XCH token as a strategic reserve:

• These restrictions may not be changed without a majority vote of the board of directors, which must include at least one independent director.
• Once the two board vacancies are filled, the board is expected to raise the approval threshold to require a majority vote from outside directors as well.
• These controls require changes and will not be implemented without at least 90 days of public notice, which will be made on the company website, Keybase channels, and/or other similar highly visible methods.
• The Company does not intend to distribute Chia Coins or dividend coins to shareholders or use coins to repurchase equity until we become a reporting company under the 1933 Act and the 1394 Act.

• Provide installation, development, ongoing service and support for the use of Chia Coin, Chialisp and Chia Smart Coin in commerce, and issue assets using Chia Colored Coins.
• Provide installation, development, ongoing service and support for the use of Chia Coin, Chialisp and Chia Smart Coin in commerce, and issue assets using Chia Colored Coins.
• Earn interest on Chia loans for market makers, governments, financial institutions, businesses and developers to use in their daily operations.