Hello everyone! Let's look at something from this today. Chia Blockchain project has become.
Glad you are interested in a topic that could revolutionize the world of cryptocurrencies. Today we dive into the network of Chia (chia.net) together. Forget everything you know about energy-hungry mining, Chia is about a green and pragmatic approach. Let's get ready!
Heads behind Chia: ‘Cypherpunks in suits’
Before we look at the technology, let's take a look at the developers. They are not unknown in the tech world.
First there would be Bram Cohen, The inventor of the BitTorrent protocol. If you've ever shared large files quickly over the Internet, then you know how awesome his work was in peer-to-peer networking. He has now transferred this expertise to the blockchain world.
At his side is Gene Hoffman. Not only is he the founder of eMusic.com, one of the first online music stores to sell music as DRM-free MP3s, but he was also CEO of early privacy company PrivNet. Gene, who is now President and CEO of Chia Network Inc., brings the experience of building regulatory and commercially viable companies.
Both refer to themselves as ‘Cypherpunks in Sportcoats“, which perfectly describes the mix of technical innovation and the focus on regulatory acceptance and company level.
What makes Chia different? Proof of Space and Time
Most blockchains like Bitcoin rely on Proof of Work (PoW), where the computing power secures the network. This is safe, but consumes enormous amounts of electricity. Ethereum, on the other hand, uses Proof of Stake (PoS), which consumes less energy but often favors concentration and centralization.
Chia has chosen a path of her own: Proof of Space and Time (PoST). Instead of tying up computing power or large amounts of capital, the security of the network is ensured by unused space on hard disks (space) and the time spent on it (time). This is called ‘farming’ and not ‘mining’.
Let's go a little further into detail:
In the Proof of Space and Time Consensus, participants prove to the network through the so-called farming process that they store a certain amount of data. Proofs of Space must be generated in a plotting process that is defined in the Chia Proof of Space design document and first published in Beyond Hellman was introduced.
Proof of Space consists of two main components: Plotting and Farming. Plotting is the proof-of-space generation phase where a user creates a ‘plot file’ that requires a one-time use of computational resources so that the proofs can be verified quickly and easily later. The plotting process must not be too simple, otherwise the protocol would completely degenerate into a proof of work. However, it only needs to be done once (as opposed to Proof of Work, where new hashes have to be found between each block or challenge). On a standard desktop PC, the plotting process can take anywhere from 30 minutes to an hour, which is only a tiny fraction of the lifespan of a plot, which can be many years.
The real consensus revolves around the process of ‘farming’. Farmers compete to create blocks as soon as a proof of space is found that meets the requirements of the challenge. The more space a farmer has or the more plot files consume more actual space measured in bytes (e.g. terabytes, petabytes). This disk space is equivalent to the hashing performance on the network, and all disk space on the Chia network is called Netspace.
Farmers respond to network challenges to earn rewards for securing the Chia network by generating proof of space from stored data. The Farming and Harvesting protocol is designed for fast and efficient proof of space verification while minimizing disk I/O (input/output) consumption. A Harvester service checks plot files for partial proof of space as soon as a challenge is received. A plot filter significantly reduces the required disk I/O consumption by requiring that a hash of the plot ID and challenge contain a certain amount of data.
The Chia farming workload is different from traditional enterprise or consumer storage applications because the data stored in plot files does not contain user data. The Chia farming workload is read-only, the distribution is completely random, and only a small amount of data is transferred between device and host. Data durability requirements (defined as the likelihood that no user data will be lost) and error rate are significantly reduced for Chia compared to storing user data. This favours also the use of used hardware, which would not be suitable for other data.
Too much detail? Let's try it easier:
In direct comparison with Bitcoin, for example, this means that you do not have to compete against everyone else in the world for each block with massive use of resources, but values are calculated once, which are then stored on your hard drive and the network ‘pulls’ a suitable value for the next transaction to expand the chain if necessary.
A typical 20TB hard drive has 3-5 watts idle and even "under load" at worst 8-10, while a current ASIC miner for Bitcoin likes to get 3500-5000 watts. So you could run a ‘farm’ of very, really many hard drives that offers somewhere between 2 and 4 petabytes of storage space for the same power requirement.
However, this is not efficient and green – and the panels must also be produced. That's why Chia's approach is different. Ideally, you should use A: Hard disk space that is otherwise unused and B: Only hardware that already exists. That's what makes this package really attractive!
For the sake of fairness, however, minds are repeatedly exposed to cryptocurrencies, which is why it is especially at the beginning in 2021. There has been a massive hard drive shortage, not least because the first Chia Coins for incredible $1600+ were traded and many had already dreamed of money stores in the style of Dagobert Duck.
But back to the actual concept. The advantages are obvious:
Energy efficiency: PoST is extremely energy-saving, as it ideally uses existing, unused hardware.
decentralisation: Since almost everyone has a hard drive, getting into the network is much easier and cheaper than purchasing special mining hardware. This encourages widespread decentralization and makes it more expensive for attackers to control the network.
Economic security: The system is designed to ensure the security of the network through a robust market for transaction fees paid in its own cryptocurrency XCH.
The next generation: Proof of Space 2.0
But Chia doesn't rest on his laurels. A major upgrade is planned for 2025 and 2026: Proof of Space 2.0. This further development brings significant improvements:
- New matching algorithm: This provides security with adjustable difficulty per table and at the same time allows immediate verification of proofs.
- Increased plot difficulty: The difficulty of plotting can be increased without affecting the proof validation time.
- Improved safety: The new system makes it even more difficult to attack or manipulate the network.
The release of Chia 3.0 with the new Proof of Space is planned for 2025, with a hard fork activation expected on June 1, 2026.
CAT Token on the Chia Blockchain
Quite simply, Chia Asset Tokens (CATs) are fungible tokens on the blockchain. A fungible token is a digital asset that is interchangeable with each other because each unit has the same value and characteristics, similar to cash.
The face value of a token is determined by the market and has nothing to do with the underlying XCH (the base currency). It is therefore possible to establish a very own currency on the Chia Blockchain.
A chia asset token (CAT) that thus serves as a digital representation of an asset, for example as another currency or an identical set of assets. The issuance and destruction of a CAT is controlled by a special chialisp program called TAIL (Token Asset and Issuance Limitations), which sets the rules for token creation and management.
Key features of CATs:
Chialisp: The Chia blockchain uses the Chialisp programming language, which enables smart contract-like functionality for creating CATs and their rules.
Tokenisation of assets: CATs enable the creation of various digital tokens on the Chia blockchain that represent a real asset.
Fungibility: Unlike non-fungible tokens (NFTs), CATs are ‘fungible’, meaning that they are interchangeable and have equal values.
Controlled output: The TAIL program precisely defines the rules for issuing and destroying tokens, thereby controlling the total amount and life cycle of a token.
Use cases: CATs can be used as alternative currencies, for bond tokenization, or for decentralized financial applications (DeFi).
Want to know the technology behind it? Click here for a detailed explanation What and how you can work with Chia Asset Token.
But there are also other cool features, let's take a look at them in detail:
Chia DataLayer: A decentralized database
Imagine that blockchain is not only a chain of transactions, but also a layer that guarantees the integrity and authenticity of data. This is exactly what makes it possible Chia DataLayer.
The DataLayer is a decentralized database that does not store the data itself in the blockchain, but only its hashes (digital fingerprints). The actual data remains off-chain and is replicated by the network nodes. As soon as a hash changes in the blockchain, participants know that the data has been updated and synchronize the new content. This prevents the blockchain from being "bloated" and enables applications that require large amounts of data.
As a decentralized database, Chia DataLayer enables users to store the original data locally. The hash of this data is then stored in a singleton (a coin with a unique ID that can be issued and recreated as often as desired), whose properties are updated each time it is recreated. The on-chain component of Chia DataLayer is also a singleton. If the hash of the original data matches the hash stored in the chain, the accuracy of the original data is guaranteed.
Basically, Chia DataLayer offers a common data network without central authority. Nodes on this network can subscribe to data from other nodes and receive updates as the data changes.
The real magic of DataLayer lies in the ability to use the data in smart contract transactions. In particular, Chialisp code can directly process datasets stored in Chia DataLayer, opening up a new world of features for Chialisp programmers that are not available on any other blockchain. The starting point is the concept of ‘proof of inclusion’.
Proof of Inclusion
A proof of inclusion is a way to prove the storage of a key-value pair without having to provide the entire Merkle tree from the store. This is achieved by creating an output of the DataLayer singleton, which accepts two things in its solution:
The hash of a key-value pair from the Merkle tree
Evidence that the same key-value pair actually exists in the Merkle tree. This proof is provided by providing the required minimum peer hashes to recalculate the Merkle root currently stored in the chain, starting from the sheet of the key-value pair. Once this proof is provided, the singleton announces the hash present in this DataLayer table.
Proof of Inclusion forms the basis for accessing Chialisp's DataLayer data. Once proven, the data can be used for other functions, from two-party commits to Oracles and off-chain contracts.
Example: Two-party commit
A two-party commit is the simplest example of proof of inclusion. This is an offer where the owner of one DataLayer table offers an update if and only if the owner of another DataLayer table makes a specific update.
A two-party commit uses an offer with six asserts and donations.
In the original tender, the manufacturer shall add the following:
A donation of the manufacturer's DataLayer singleton to perform the update of its table.
A donation of the manufacturer's DataLayer singleton to announce a proof of inclusion of the updates made.
An assert of the taker's announcement of a proof of inclusion of a required update.
To accept the offer, the taker adds the following:
A donation of the taker's DataLayer singleton to perform the update.
A donation of the recipient's DataLayer singleton to announce proof of inclusion of the updated data.
An assert of the manufacturer's proof of inclusion.
The bid-spending bundle is only executed if all required asserts are met.
It will be interesting if other coins interact with this announcement. Another coin can accept key and value in its solution, hash and confirm an announcement of the DataLayer coin via a proof of inclusion of this hash. If the confirmation is successful, the coin can use the data in key and value as validated input for any actions.
Climate warehouse: Transparency for the carbon market
A crucial application example is the Climate warehouse. The carbon market suffers from a lack of transparency and the risk of double counting of emission allowances. This is where the Climate Action Data Trust (CAD Trust), An initiative of the World Bank.
The CAD Trust uses the Chia DataLayer to create a public, auditable and tamper-proof metadata layer for carbon markets.
Various organisations and countries can publish their data on carbon projects, and the DataLayer ensures that this information is transparent and comprehensible. In this way, the integrity of climate markets is strengthened and double counting is avoided.
Here is the video of the announcement for more background:
And here I have a few more details for you how the dashboard works:
Here I quote again bissl from the FAQ:
The Climate Warehouse program connects various digital tools and products to create an end-to-end digital ecosystem for carbon markets in line with the requirements of the Paris Agreement.
The Climate Warehouse End-to-End Digital Ecosystem for Carbon Markets includes infrastructures such as digital MRV systems, national open source carbon registries, tokenization tools for issuing and tracking digital carbon values, and the Climate Action Data Trust.
The CAD Trust is the culmination of a three-year prototype and test series as part of the World Bank's Climate Warehouse initiative.
The CAD Trust's open source data system uses distributed ledger technology, especially blockchain technology, to create an immutable, verifiable and decentralized record of carbon market data. The operating system of the CAD Trust uses the data layer of the Chia network, which is based on a public and permission-free blockchain technology.
The Chia blockchain's proof-of-space and time consensus mechanism has a lower environmental impact than other technologies and meets the technical and business requirements of the CAD Trust. The CAD Trust recognizes the rapid technological development in this area and the emergence of new platforms and will therefore continue to explore opportunities for the use of new technologies to support transparency, interoperability, reduce transaction costs and improve the integrity of carbon markets.
Chia Cloud wallet
The Chia Cloud wallet, A web-based solution for managing digital assets on the Chia blockchain. The wallet is designed to simplify the management of digital assets and make them accessible from any device with a modern web browser.
- Security: Passkeys are used for authentication and a two-key system with a spend key and a recovery key. A time-delayed clawback function protects against compromised keys.
- Support for assets: The wallet supports XCH, Chia Asset Tokens (CATs) and NFTs.
- Trade: It supports offer files for secure peer-to-peer trading.
- Consensus mechanism: The platform is based on Chia’s Proof of Space and Time mechanism.
- Current status: The wallet is currently in an early release phase, but is aimed at new and experienced users.
Third-generation blockchains such as Chia have fundamentally changed the possibilities of digital assets. Traditional crypto wallet solutions often have significant drawbacks: complex interfaces, limited accessibility, lack of self-government or security concerns. The Chia Cloud Wallet is a web-based solution that combines security and utility with the convenience and accessibility of modern financial applications.
The Chia Cloud Wallet provides a secure and easy-to-use way to manage your digital assets from any device with a modern web browser.
The Chia Cloud Wallet is designed for maximum accessibility and self-management. As a web application, you can access your digital assets: Whether on your desktop, laptop, tablet or mobile phone. You control the keys and thus maintain full control over your assets. The web-based approach eliminates the need to download and install software and makes getting started managing digital assets easier than ever before.
The Chia Cloud Wallet supports hardware and software passwords, so you don't have to remember complex passwords. Just visit the website, create your account and start managing XCH and other digital assets.
Enhanced security with Passkeys and Chia Signer
The Chia Cloud Wallet uses modern passkey technology for authentication, providing a safer and more user-friendly alternative to traditional passwords. Set up passkeys for secure access to your account, either with hardware devices such as YubiKey and other FIDO keys, software solutions such as password managers or operating system-integrated passkey providers is easily possible. You can also use passkeys or the Chia Signer app as the output key for your assets.
The Chia Signer app uses the security features of mobile devices and allows you to manage keys and share transactions directly from your smartphone. This provides additional security and ensures that all sensitive processes require explicit consent.
The Chia Cloud Wallet uses a sophisticated two-key system with vaults: an output key to authorize transactions and manage your digital assets, and a recovery key that is essential for restoring account access when needed.
This approach ensures that assets remain protected even with a compromised key. The recovery key can be used to restore your vault if you lose access to your output keys, but it cannot be used for expenses.
This recovery process is protected by a time delay (clawback) that you set yourself when creating your vault. During this time, you can use your output key to cancel the recovery and re-encode the vault if the recovery key has been compromised.
Comprehensive asset support
Chia Cloud Wallet supports a variety of digital assets on the Chia blockchain:
XCH: Chia's native cryptocurrency
CAT: Chia Asset Tokens (CAT) for fungible digital assets according to the CAT2 standard
NFT: Non-fungible tokens according to the NFT1 standard
The platform supports standard transactions for all of these asset types, making it easy to manage your entire digital asset portfolio from a single interface.
Support of offer files (offer files)
One of the most powerful features of Chia Cloud Wallet is the support of Chia's offer file. Offer files enable secure peer-to-peer trading and transactions. You can create and interact with quote files for XCH, CAT2 tokens, and NFTs to safely participate in the Chia ecosystem.
The platform automatically manages tokens associated with active offers, ensuring that you do not accidentally spend coins that are part of an active transaction. This feature simplifies transaction creation and prevents frequent user errors.
Chialisp: A language for the future
What particularly impresses Chia is her own Programming language Chialisp. Designed with security and auditability in mind, it is designed to be as simple and efficient as possible while still offering broad functionality. The roots go with Lisp, the second oldest high-level language after Fortran Back to the late 1950s.
There are many reasons to choose Lisp as the basis for this language, although it is already over 60 years old.
CLVM
Chialisp compiles into a lower form, the CLVM bytecode (Chialisp Virtual Machine). This allows the language to change over time without changing the actual execution.
Sandbox
CLVM runs entirely in a sandbox to prevent access to the host machine. This is important because the Chia blockchain needs to run on hundreds of thousands of computers.
Programs are evaluated and therefore cannot generate new processes or interact with the system.
Auditable
Code written in Chialisp has no ‘side effects’ or hidden information. This makes it easier to find security flaws and bugs. This is essential for smart coins for the Chia blockchain.
Composable
A program in Lisp is just a list. This enables powerful techniques that allow you to change the source code during program evaluation. You can even have multiple program levels running in different phases.
New language functions
Chialisp has received new features similar to those of other languages in the Scheme and Lisp family. The new functions are Listed in detail here.
Chialisp allows developers to create complex smart contracts that are secure and traceable at the same time. This is especially important for institutional applications where compliance and auditability are critical. We'll get to that in the next section:
The future: Permuto Capital and the Tokenization of Shares
Chia sees itself not only as a currency, but as an infrastructure for the financial world. Right here comes Permuto Capital It is a joint venture between Chia Network Inc. and 3V Capital Partners.
Permuto is working on the tokenization of traditional stocks, to make them tradable as Chia Asset Tokens (CATs) on the blockchain. This means that shares of companies such as Microsoft (MSFT) or Apple (AAPL) can be split into digital certificates. This allows for more efficient, faster and cross-border trading of financial products.
A nice article as a view into the near future Blockchain-based new financial services For example, PwC or Reflections on the Future of DeFi from medium.com.
Gene Hoffman is also co-CEO of Permuto Capital, underscoring the close connection and strategic direction of combining traditional financial markets with blockchain technology.
Solving the Blockchain Trilemma?
Gene Hoffman describes in his essay:Cypherpunks in Sportcoats“ the fundamental problem of blockchain technology: the Blockchain trilemma. A blockchain can only fulfill two of the three characteristics at the same time: Be safe, decentralized or fast.
Chia has deliberately opted for security and decentralization and relies on Layer 2 solutions for speed. This strategy makes perfect sense: Layer 1 remains a secure base, while most day-to-day transactions are handled on faster Layer 2 protocols.
Economic evaluation: More than just speculation
What sets Chia apart from many other crypto projects is the thoughtful economic approach. Gene Hoffman's valuation model shows that cryptocurrencies have fundamental value, based on the demand for block space and the speed at which coins are used for transaction fees.
The model takes into account three key elements:
- The blockchain trilemma and the resulting scarcity of blockspace
- The security budget, financed by transaction fees
- Real applications, creating real economic value
According to this model, with certain assumptions about market share and adoption, XCH could well reach a value of several hundred dollars, not by speculation, but by real use.
Regulatory compliance: The key to success
Another key difference to many other blockchain projects is Chia's focus on regulatory compliance. The company aims to become a publicly-reported company and actively cooperates with regulators.
This approach may seem boring to some crypto purists, but it is crucial for adoption by institutional investors and large corporations.
Chia therefore deliberately positioned itself as an enterprise-ready blockchain from the outset.
Strong investors, big visions
The list of investors also shows that Chia is on the right track. Names such as Andreessen Horowitz, Naval Ravikant, Greylock Partners and Galaxy Digital are behind the project. These venture capital firms are known to only invest in projects with real potential.
Conclusion: A blockchain for the real world
Chia Network stands out in the crowded world of cryptocurrencies because it offers a rare combination of technical innovation, economic thoughtfulness and regulatory foresight.
Proof of Space and Time technology solves Bitcoin's energy problem without taking the centralization risks of Proof of Stake. The DataLayer enables applications such as the Climate Warehouse to solve real-world problems. And with projects like Permuto Capital, Chia shows how blockchain technology can revolutionize traditional financial markets.
The upcoming upgrade to Proof of Space 2.0 shows that the team is continuously working on improvements and further developing the technology. With cypherpunks in suits at the top, Chia seems well positioned to bridge the gap between the visionary world of cryptocurrencies and the practical requirements of the traditional economy.
Whether Chia actually represents the next generation of blockchain technology, especially in the SmartContract and DeFi area, time will tell. But the fundamentals are promising, and that's already a remarkable achievement in the fast-paced crypto world.
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