Be wary of the early “IQ tax” of Chia mining machines

Following Filecoin, the popularity of Chia mining machines has exploded. The “luxury founding team” and “first-line investment lineup” have become Chia’s own halo, and another star project has appeared in the distributed storage track.

But on the other hand, the high-priced sales of crude mining machines, the MLM propaganda style, and the introduction of speculative funds seem to have changed the taste of the Chia project, which is still in its early stages.

Chia’s “marketing” wind pervades the community

In various encrypted communities, Chia has screened the circle of friends.

Chia was founded in 2017 by the former BitTorrent founder Bram Cohen. The core team members also include Gene Hoffman, the former founder and CEO of eMusic.com and Vindicia, and Mitch Edwards, the former acting CEO of Overstock.com. The founding team lineup is quite recognized and respected by the market.

From 2018 to 2020, Wall Street institutions such as A16Z, Danhua Capital, and DCM Ventures invested in Chia. The team’s financing situation is relatively optimistic, and the luxurious investment lineup has become Chia’s second advantage.

On March 18 this year, Chia Network officially released the Chia1.0 mainnet and started mining. Both belong to the distributed storage track. In the promotion of Chia-related mining machines, it is indispensable to benchmark with Filecoin. And most of the general perception of Chia in the market is: If you miss the best time for Filecoin to enter the market, Chia is currently very likely to be the early stage of the next Filcoin, and its appearance seems to be at the right time.

Since the end of March, Chia has been swiftly blowing a strong “marketing” wind in the Chinese community. When Fomo’s emotions rose, more and more people issued risk warnings to the explosive Chia and all kinds of dazzling Chia mining machines.

Chia: An affordable alternative to Filecoin?

The market was the first to affirm Chia’s founding team and luxurious investment lineup.

In September 2019, Coinbase published a content that showed 17 unlaunched projects that intend to go online, including Chia. This has given some speculators higher expectations for Chia’s landing on Coinbase.

Compared with Chia’s high expectations in the context of “luxury”, its technical route and development prospects actually require more time for testing and further observation of the market.

Official information shows that Chia promotes the concept of environmental protection, hoping to reduce the energy consumption of “mining” while ensuring safety, and therefore changed the concept of mining to “Farming”. Blocklike compiled multiple channels and official information, and summarized the main ideas proposed by Chia:

1. Enterprise-level currency: sell software services to governments, financial institutions, enterprises, and large storage buyers and sellers, support open source blockchain, and intelligent transaction software.

2. Promote the development of DeFi, DEX, and cross-border payment.

3. Allow individuals, financial institutions, enterprises, and governments to issue assets on the chain. These assets inherit the smart transaction capabilities of the Chia Network blockchain and rely on the global decentralized security verification provided by the time and space certification.

4. Solve the problem that mining consumes a lot of resources: reduce the negative effects and impacts of Asic, computing power, and power consumption.

It’s worth noting that Chia uses “Proof of Space and Time” (PoST). This unique method of proof is different from BTC and ETH using Proof of Work (POW), and it also uses “Proof of Space and Time” with Filecoin. “different.

Time and space prove that PoST can use the remaining storage space in storage devices (computers, servers, NAS, Raspberry Pi, etc.) for mining. What Chia mining requires is not computing power, but storage space. That is to say, when mining in Chia, the larger the hard disk space, the higher the efficiency.

From the perspective of mining, Chia can be regarded as a type of POC mining. Chia and Filecoin belong to the storage track, and they do have many familiarities with Filecoin mining.

An industry practitioner and Filecoin miner manufacturer analyzed in an interview with Blocklike that according to his observation, the technical threshold of Chia’s entire project is extremely low, and the equipment required is much lower than that of Filecoin. In direct comparison with the Filecoin mining machine, the Chia mining machine has a very low configuration in computing power machines and storage machines. According to Chia’s economic model, Chia does not need to be maintained during farming, and there is no penalty setting for participants to lose computing power, and there is no need to mortgage coins. If investors want to participate in mining, they only need to configure simple equipment and download the mining applet on the official website.

“Compared to Filecoin, the threshold for Chia mining has been reduced almost the most.”

He believes that such a low threshold is also one of the main reasons why many investors are rushing to enter. POC mining is one of its innovative methods, but it has almost become an industry that everyone can enter. At present, entering the market is not a good choice. “

Currently, on the Chia mainnet, users can participate in planting by contributing idle hard disk space. However, the transfer function of the entire network has not yet been opened. At present, the only way to obtain Chia token XCH is to “plant” by contributing hard disk space, which directly leads to investors’ eager purchase and the crazy increase in the price of Chia mining machines.

The Chia mining machine is “harvesting”?

The Chia project is still in its early stages, and the price of mining machines has already “taken off” ahead of schedule.

Blocklike learned from mining machine manufacturers that the production of normal distributed storage mining machines will mainly go through the following stages:

(1) The official recommended configuration version

(2) Enter the optimization stage: modify the code to update the configuration

(3) Mining machine upgrade and iteration

Judging from the currently officially announced standard version configuration, if the mining machine manufacturer assembles the computing power machine, storage machine and related accessories enough, the assembly can be completed and the code tested in about 3 days. After that, professional mining machine manufacturers will set aside about 7-10 days for data testing and make a feasibility report. At this stage, mining machine manufacturers usually carry out code optimization and upgrade configuration to improve the competitiveness of mining machines.

But for Chia mining machines, due to the rapid increase in prices of hard drives in the industry, many professional mining machine manufacturers choose to wait and see. According to the introduction of the mining machine manufacturers, the major manufacturers usually refer to the hardware price for quotation reference.

In late March, the price of Chia mining machine’s hard disk per TiB cost is generally around 160-170 yuan, and the price of Chia mining machine’s early 1 TiB is mostly around 200 yuan. Up to now, due to the general increase in the prices of computing power machines, storage machines, and hard drives, the price of 1 TiB for many Chia mining machines has been pushed up to around 600-700 yuan.

“Now storage machines are out of stock, and manufacturers can’t buy them,” said the miner manufacturer.

According to many sources of Blocklike, in terms of the stock of mining machines, the current scarcity of mining machines is not due to insufficient output, but mainly because upstream suppliers are reluctant to sell them. According to public data, the total shipment of solid-state drives in 2020 will be 330 million, and the total storage capacity will be 27 EB. The total shipment volume of mechanical hard disks is 259 million, of which Seagate, the world’s largest manufacturer of hard disks, disks and read-write heads, shipped 110 million, with a total storage capacity of 1018 EB.

In the current market, a large number of distributors and agents upstream of mining machines have participated in the hype of hard drives, facing the active miners group in the form of starvation marketing. It is reported that in the last week alone, the cost of computing power and storage equipment continued to rise, and the price of hard disks rose more than 3-4 times. At the same time, the price of hard disks fluctuated drastically, and the instability of prices was increasing.

Under this circumstance, some mining machine manufacturers believe that the present is not a wise time to intervene in the Chia mining machine.

As for investors, most investors who have missed Filecoin investment opportunities bet their hopes on the Chia mining machine. In the mixed Chia mining machine market, some of the Chia mining machines sold by unscrupulous merchants at high prices may be just ordinary computer motherboards and hard drives that have downloaded the official “planting” program. The technical content of this type of mining machine is almost zero. The price has risen along with marketing methods.

How to rationally judge the Chia mining machine configuration and reasonable price range?

The mining machine manufacturer mentioned above suggests that when investing in Chia mining machines, investors are advised to refer to the three data dimensions of “single TiB cost”, “single TiB coin production”, and “current OTC real transaction price” as much as possible when investing in Chia mining machines. And combined with their own expectations and judgments about the future market situation, make a choice.

“For early investors of Chia mining machines in late March, referring to the current OTC price, the return period may be only a dozen days. But for current investors, the return period has been lengthened. The computing power that was snapped up in the market before will be delivered in a centralized manner next month, which is equivalent to the return cycle being lengthened again.”

Chia’s next step: waiting for the approval of the head agency

For the Chia project, the other side of the discussion also began to sound, and the innovation and sustainability of the Chia project were questioned.

This part of the view believes that the concept of “Green Bitcoin” is not Chia’s original concept. At present, it can be seen from the operation of a large number of Chia mining machines that Chia miners will still invest a large number of mining machines and resources into “planting”. Driven by the maximization of profits, the actual power consumption of the mining machines is not too great. Big difference.

On the other hand, the POC track has also been discussed by the market again.

The POC (Proof of Capacity) consensus has been put forward for more than 6 years. This PoC project is mainly against Bitcoin, with energy saving, more decentralized and fairer mining as its core competitiveness. In the field of distributed storage, Chia is regarded as a typical “monetary project that uses hard disk space as a proof of computing power for mining and benchmarks against Bitcoin.”

Due to the low threshold for participation in this model, the influx of large-scale funds is conducive to increasing the popularity of the project. However, up to now, the development of the POC track has not been satisfactory, and there has not yet been a typical project case with strong sustainability.

Although the popularity and traffic of Chia mining machines are expanding, the industry’s leading capital, exchanges, and media have not formally voiced the project, and relatively branded institutions are relatively conservative in the promotion of Chia computing power and can accept Chia transactions. The platform is still dominated by copycat exchanges.

In the long history of the development of mining coins, the game of decentralization and the centralization of mining pool tyrants is still moving forward in controversy. Whether Chia can realize its vision still needs time to test. However, the current mining machine market is mixed, and the Chia project is undoubtedly at a very early stage. A more rational view is that ordinary investors still need to observe the degree of recognition of the project by mainstream exchanges and mainstream institutions.

Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.