Official Chia Answers: 20 Questions You Need to Know Before Participating in Chia Mining

This article was published on ChainNews, author: Chia Network, translation: Lu Jiangfei.

To help readers better understand this project that went live on the mainnet at the end of March, we have selected some of the most important Q&A from Chia's official documentation for readers.

It must be pointed out that due to the concept of hard drive mining involved in Chia Network, there are many teams selling so-called "Chia computing power" in the market, making it difficult to distinguish between genuine and fake. The Chia team has repeatedly emphasized:

"It is expected that the volatility of Chia tokens will be smaller than that of other cryptocurrencies, which will allow financial institutions to use tokens and stocks for hedging."

Readers must discern the investment risks associated with this project and related products.

What is Chia?

Chia was founded in August 2017 with the aim of developing a platform that optimizes blockchain and smart transactions. We are building Chia Network to improve global financial and payment systems.

Chia will become the first enterprise-grade digital currency.

Chia is using a new consensus algorithm called "Proof of Space and Time," created by Bram Cohen, the inventor of BitTorrent and one of the best network protocol engineers in the world today.

Chialisp is Chia's new smart transaction programming language, which is powerful, easy to audit, and secure. The currently supported reference smart transactions include: atomic swaps, authorized payees, recoverable wallets, multi-signature wallets, and limit wallets.

What is Proof of Space and Time?

Proof of Space is a cryptographic technique where a prover demonstrates that they have allocated unused hard drive space for storage. However, to use "Proof of Space" as a consensus mechanism, it must be linked with Proof of Time, which ensures that there is consistency in the time between blocks, thereby enhancing the overall security of the blockchain.

How do Proof of Space and Proof of Time work?

Proof of Space can be seen as a way to "prove that you have reserved some unused storage on your hard drive." Chia blockchain users need to install software to snapshot their unused space on the hard drive, a process also known as "plotting." This software will store a set of encrypted numbers on the disk into "plots," and those who perform these operations are called "farmers." When the blockchain broadcasts the next block challenge, farmers can scan their "plots" to see if they have the hash value closest to the challenge. Chia will allocate the probability of winning a block based on the size of space the farmer has compared to the total network space.

Proof of Time requires that there must be a small amount of time passed between blocks. Proof of Time is implemented through a Verifiable Delay Function (VDF), which takes a certain amount of time to compute but can be verified very quickly. The core idea of the verifiable delay function is sequential computation, as a large number of parallel devices do not yield any benefits, thus minimizing power waste. The number of VDF servers ("Timelords") may be relatively small, as the fastest VDF servers will always be at the forefront, and only one fast and fair Timelord is needed on the network to complete a block and advance the entire blockchain.

What is Chialisp?

Chia has developed a new innovative blockchain programming language called Chialisp. This blockchain programming language is powerful, easy to audit, and very secure. Chialisp is also an excellent on-chain smart transaction development environment that can unleash the security, transparency, and usability promised by cryptocurrencies.

You can click this link to read a blog post introducing Chialisp, or you can directly visit Chialisp.com and search for relevant documentation.

You can click this link to read a blog post introducing Chialisp here, or you can directly visit Chialisp.com and search for relevant documentation.

What are the advantages of Chia?

Chia adopts a new consensus algorithm that can completely eliminate the energy consumption demands of proof-of-work blockchain systems. Compared to other cryptocurrencies, the Chia blockchain is more decentralized, and its security is significantly enhanced. Chialisp is a new smart transaction programming language for the Chia blockchain, which is powerful, easy to audit, and very secure, better unleashing the security, transparency, and usability promised by cryptocurrencies.

In addition, Chia uses more advanced cryptographic tools to achieve rich smart transaction functionalities. Through a public, open-source, profit-driven development company, Chia is adopting a new high-level solution to build and support the blockchain and provide support to blocks. Chia will use "pre-farming" (strategic reserves) to address token volatility issues, aiming to mitigate the impact of market bubbles or crashes on Chia while further promoting Chia adoption.

Where can I find technical details about Chia's consensus algorithm?

The Chia project has released many academic papers and presentations that detail the new consensus algorithm and blockchain software, such as:

In 2019, Chia released the project white paper, which outlined the constructions of Proof of Space and Proof of Time and explained many design choices of Chia. Chia has updated its consensus algorithm, and you can review our working documents and provide feedback. Mariano Sorgente from MIT explained how to achieve Nakamoto consensus through Proof of Space and VDF in a presentation in 2019. Bram Cohen gave a talk on Proof of Space at Stanford University in February 2018. Chia project advisors Dan Boneh, Benedikt Bünz, and Ben Fisch also published a special research report on VDF (the foundational technology for Proof of Time). Lipa Long presented an explanation of category groups based on Proof of Time. In January 2018, at the BPASE'18 conference, Bram introduced the application of Beyond Hellman's time-memory trade-off and Proof of Space based on Hamza Abusalah's academic paper and PPT. According to the academic paper and Hamza Abusalah's slides, Bram demonstrated the application of Beyond Hellman's time-memory trade-off and Proof of Space at BPASE 2018 in January 2018. Ben Fisch gave a presentation on verifiable delay functions at the BPASE 2018 conference in January 2018. Bram Cohen gave a talk about Chia at the Blockchain at Berkeley event in March 2018 (the content starts from the 20th minute of that video). Bram Cohen presented a talk on eliminating waste using Proof of Space and Proof of Time at the BPASE 2017 conference in January 2017, and the presentation can be downloaded from this link. Bram Cohen also gave a talk on extending Bitcoin's data structure at the Bitcoin Devs Seminar (related PPT and Merkle Set code). Bram Cohen presented on eliminating cryptocurrency waste at the SF Bitcoin Devs Seminar.

What is Chia's development strategy?

We believe that the blockchain industry is still developer-led, and when they intend to deploy new applications and services, we hope that Chia will be the blockchain of choice for these developers and become the secure choice for applications like stablecoins linked to sovereign currencies.

Chia Network's business will be the first profit-driven company managing pre-farmed tokens, and we intend to be the first publicly traded "ETF-like" cryptocurrency.

Just as Redhat and MySQL AB were behind the adoption of Linux and MySQL by enterprises— we believe that when sovereign nations, financial institutions, and businesses start using cryptocurrencies in everyday transactions, Chia will be able to provide support and training.

Finally, we believe that Chia will be able to leverage the storage ecosystem to drive adoption among enterprises and end users, as hard drive manufacturers and storage server vendors are likely to bundle "space farming" into their products.

For more details, please refer to the business white paper.

What is the difference between Chia farming and traditional mining?

Mining requires expensive one-time hardware devices that often consume a lot of power. We aim to solve this problem with a fair, environmentally friendly, and higher-quality blockchain. The Chia blockchain uses "farming" to make full use of existing unused hard drive space distributed across global nodes. "Farming" is decentralized because anyone who has installed Chia software and has "plots" can win the next block. Mining requires two conditions: first, custom expensive one-time mining hardware; second, access to wholesale or lower-priced electricity. Therefore, only professional mining companies can afford these costs. "Farming" is more decentralized because it relies on idle hard drive space, and anyone with a mobile phone, laptop, or company network currently has a lot of unused extra storage space.

Unlike mining, once you complete the storage "farming," you can repurpose the storage, for example, to store your family photos.

Why farm Chia?

You can "farm" Chia on unused storage space on your phone, laptop, or company network, and in return, you have the opportunity to earn chia representative rewards to help secure the blockchain. Our software allows users to allocate a certain amount of unused disk space to create "plots." Since the only resource-intensive step is the initial plotting, once the Chia node software is downloaded, the drive will mine a "plot" in the background. After the "plot" is completed, your computer will farm on your behalf, and the software will do all the work and track representative rewards for you. It is worth mentioning that farming will only occupy a small portion of network bandwidth and will consume almost no resources other than storage. Additionally, the farming process is available to anyone with unused disk space, and Chia is moving towards achieving a truly decentralized blockchain, which will also serve as a form of cross-subsidy for the storage and cloud industry.

Before chia/XCH is listed on cryptocurrency exchanges, farming will be the only way to obtain chia/XCH.

What is Chia's "strategic reserve"?

At the network launch, Chia will conduct "pre-farming" and mine a large number of tokens, which will help stabilize the Chia economy through the Chia lending business plan and assist in future development.

Detailed information is provided in our business white paper.

Why conduct "pre-farming"?

Chia has a novel business model that can reduce token volatility and increase adoption rates. By lending Chia and managing these loan rates along with other tools (for example, using Chia tokens to purchase our stock), we hope to further reduce the quarterly volatility of the tokens.

To further promote application adoption, we plan to lend Chia to 5,000 companies worldwide, which will use Chia to provide fast, cheap, and secure payments to global suppliers.

We also intend to use the strategic reserve to assist in development and adoption efforts, as well as other initiatives, such as investing in promising startups within the Chia ecosystem and temporarily increasing farming rewards to stimulate additional farming activities. If businesses use Chia instead of fiat currency for international payments, they can receive a "benefit" of 105% of the transfer amount.

Will Chia conduct an ICO?

No, Chia does not have an ICO plan. Instead, our goal is to go public on a U.S. stock exchange. This way, shareholders can share risks and rewards with management in a transparent and public manner, and we can make binding statements about how Chia Network intends to use the strategic reserve, leveraging well-understood corporate governance. Chia digital currency is a useful payment tool but not an investment opportunity. Chia intends to complete a regulatory-compliant IPO registered with the SEC and will go public at an appropriate time after the mainnet launch.

Can I buy Chia now?

Not yet. Once the mainnet launches, we expect to allocate farming token rewards on the network six weeks later, and token trading will not be allowed. This is to provide a period to help stabilize the amount of storage space allocated to the Chia blockchain and prioritize our storage space farmers.

Additionally, the released candidate farming software will be able to generate "plots," which can be farmed on both the testnet and mainnet. Once the mainnet launches token trading, you will be able to purchase Chia on most exchanges worldwide.

What is Chia's inflation rate?

After Chia conducts pre-farming, farming token rewards will be issued at a rate of 64 Chia every 10 minutes. In the initial 12 years, the farming rewards will be halved every three years. From the 13th year onward indefinitely, the token rewards will remain constant at 4 Chia every 10 minutes, meaning the inflation rate will continue to decline. After 22 years of mainnet launch, Chia's inflation rate will drop to 0.50%.

Does Chia use Bitcoin code?

No. All Chia code is original.

Is Bitcoin not good enough?

When Bitcoin was developed, the market did not foresee that the computing power of dedicated mining hardware would greatly exceed that of ordinary computers, leading to a decentralized network being controlled by a few miners who could leverage chip manufacturing and wholesale electricity procurement (or worse). The current miners controlling the Bitcoin network believe they still have a competitive advantage and explicitly oppose changes to the protocol—even when it is clear that the protocol should be changed. Chia has spent ten years researching a new digital currency ecosystem and believes we can make cryptocurrencies more decentralized, secure, and user-friendly.

Will Chia's value fluctuate like other cryptocurrencies?

We believe that due to our plans to go public, the token's volatility will be smaller than that of other cryptocurrencies, which will allow financial institutions to use tokens and stocks for hedging.

Initially, we expect the valuation of Chia Network to be primarily based on the company's valuation of Chia on its balance sheet, and the price of Chia on digital trading platforms is likely to reflect changes in stock prices on the stock exchange. Compared to traditional blockchain projects, there are more ways for people to understand Chia's success, which will also make our stock's regular options and derivatives available as synthetic derivatives similar to Chia token prices. Additionally, our ability to use Chia's strategic reserves may also help reduce the volatility of Chia in the market.

What is Chia's level in applying cryptographic technology?

Chia has created three new core inventions and driven market interest and adoption. First, Chia created the first production BLS Signatures library. Second, Chia will be the first production use case for Verifiable Delay Functions (VDF). Third, Chia created Proof of Space and Time for Nakamoto consensus.

Can ordinary people use Chia as a payment tool?

We hope so. Over time, Chia will be supported by global PoS systems and consumer payment applications. For example, if you use the GrabPay app in Thailand to buy coffee at Tully's in England, it can "work normally," and consumers do not need to know that the transaction was paid with Chia.

As another example, if you live in a place where remittance services like Venmo or Cash App are unavailable, using Chia will be much less troublesome compared to slow and expensive wire transfers. Using traditional banking for cross-border remittances and currency exchange is both troublesome and slow, with high costs. While alternative remittance services may be faster, they are not cheap: Western Union charges up to 10% in remittance fees.

Chia technology will be fully open-source and accessible, allowing anyone to build new wallets without our permission or assistance. Moreover, we will help wallet, exchange, and merchant partners by providing support and integration services, joint marketing, and liquidity loans.

Why choose the name Chia?

We are an environmentally friendly currency. When Chia founder Bram Cohen started the company, he wanted to reduce the energy dependence of blockchain through "green" initiatives. The concept of farming seemed to be the best metaphor for filling unused disk space and monitoring it to achieve environmental goals, which led us to seek a "crop" name that could embody environmental characteristics for the new network. Additionally, the team wanted a short and impactful name, and everyone was pleased that Chia is a "crop" related to whimsical memes—thus, Chia Network was born.