Understand Chia Network in three minutes: What are the characteristics of a self-proclaimed "compliant and environmentally friendly Bitcoin-like public chain"?

This article is from ChainNews, authored by Leo Yang.

Chia Network was founded by Bram Cohen, the creator of the peer-to-peer file-sharing software BitTorrent, in August 2017, and has since received investments from 9 institutions and individuals including a16z, Naval Ravikant, Slow Ventures, and True Ventures.

Chia pursues environmental friendliness and efficiency, embraces regulation, and aims to create a secure and user-friendly open-source decentralized blockchain network, intending to become a global payment settlement network system that meets the needs of sovereign nations, financial institutions, and large enterprises.

Technical Features

According to its white paper, Chia uses a new consensus mechanism --- Proof of Space and Proof of Time. It ensures minimal energy consumption, allowing anyone with sufficient storage space to mine using a computer, smartphone, or enterprise-level network without the need for mining machines or specialized GPUs. The Chia commercial white paper states:

"We expect that compared to Proof of Work (PoW) and Proof of Stake (PoSe), Chia farming will significantly reduce energy consumption and resource centralization."

To ensure commercial application and customizability, Chia independently developed a Lisp-based smart contract language called Chialisp. The Chia team claims that Chialisp is secure and concise, specifically designed to meet the needs of the banking, payment, and financial applications.

Unlike non-custodial asset management in existing blockchains, Chia allows users to customize asset custody and settlement settings to prevent issues such as key loss and hacking. Chialisp will also facilitate blockchain applications to comply with Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

Other special features include:

• Multi-signature and atomic swaps: Allowing enterprises to quickly complete transactions using multi-signature accounts.
• Authorized receiving wallets: Setting specific wallets to designate receiving accounts, reducing risks of attacks and fund misappropriation.
• Transaction rollback: Allowing transactions to be rolled back within a certain block, catering to needs such as transfer errors and shopping refunds.
• Deploying "Colored Coins" smart contracts, allowing institutions to issue assets on-chain. "Colored Coins" smart contracts enable Chia on-chain applications to complete complex arbitrage transactions without "flash loans," enhancing DeFi applications.
• And restrictions on transfer amounts, sub-account paper wallets, and decentralized identities.

Compliance

From the perspective of technology adoption and functionality, Chia has made ample preparations for compliance.

As early as 2018, Chia Network applied for a mini IPO with the U.S. Securities and Exchange Commission (SEC), attempting to raise funds from the public through Reg A+, but ultimately, Chia Network was unsuccessful, while another blockchain company, Blockstack, received SEC approval and completed fundraising through Reg A+.

Subsequently, Chia slightly shifted its direction, planning to list on the U.S. stock market. After the mainnet launch, Chia will apply for an IPO with the SEC at an appropriate time.

Economic Model

The Chia Network mainnet was launched on March 17, 2021, with the native token XCH.

There is no upper limit on the total token issuance. It adopts a block reward halving mechanism similar to Bitcoin. The halving schedule is as follows:

• In the first three years after the mainnet launch, each block rewards 64 XCH (one block every ten minutes)
• From the fourth to the sixth year, each block rewards 32 XCH
• From the seventh to the ninth year, each block rewards 16 XCH
• From the tenth to the twelfth year, each block rewards 8 XCH
• After twelve years, each block rewards 4 XCH

At the launch of Chia, the "Strategic Reserve" managed by Chia received a genesis allocation of 21 million XCH. The Strategic Reserve is used for Chia's economic growth, shareholder rewards, or investments in the development of Chia network applications. Chia also hopes to reduce XCH price volatility by utilizing the Strategic Reserve.

Mining

Mining for Bitcoin and Ethereum requires a significant amount of electricity and specialized equipment. In contrast, Chia is more environmentally friendly, allowing mining to earn rewards as long as idle devices have sufficient hard drive space. The Chia team has repeatedly stated that from this perspective, Chia can better achieve decentralization.

Chia mining requires two steps --- plotting and farming. Plotting involves installing and configuring mining software on idle devices. The configuration software temporarily occupies about 332 GB of hard drive space, and after installation, the software occupies between 103.3 GB and 108.8 GB. Once installed correctly, mining can begin.

The mining process consumes very little bandwidth resources; aside from the required hard drive space, there are no other significant resource consumption.

For hardware requirements and details regarding Chia configuration, please refer to the Chia Blockchain Wiki.

Conclusion

Chia particularly emphasizes the widespread application of payments. It can lend Chia to creditworthy institutions such as governments and financial institutions for asset issuance, increasing market liquidity, and other purposes. At the same time, it helps the Fortune 500 companies achieve low-cost and secure cross-border payment solutions.

Chia's vision can be summarized in a sentence from the white paper:

"One day we will be able to buy coffee in California with Chia. Currently, banks, governments, and DeFi organizations will use it to build new financial technologies, solve cross-border issues, and eliminate the need for excessive intermediaries in the future."