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Chia: How It Works and the Potentials

BitForex Editor
May 08, 2021

The cryptocurrency market is an interesting and vast space that seems to surprise you every time. From new sets of tokens being launched to the market cap of so many underrated coins skyrocketing daily. Case in point, how Dogecoin has hit its highest market value recently. However, a relatively new coin that has recently caught the attention of so many investors is Chia.

Founded by the inventor of BitTorrent, Bram Cohen, Chia first announced its intention of going public in 2018. However, there were a few setbacks that hindered this process from happening. This led to its release in March 2021, with hopes to ensure transactions begin on May 3.  But this isn't what has got many investors interested in this new cryptocurrency. Instead, the way it works and it's potential are what have piqued the interests of so many.

If you fall into this category or simply want to gather as much information as possible about this coin, we will go into detail in this article.

Let's start from the top.

What is Chia?

Chia is another ERC20 coin powered by the Ethereum network and similar to DAI. Both tokens primarily earn interest from Maker's Dai Savings Rate (DSR) and Chia makes about 4% currently. The smart contract, project, and interface of the Chia token were created by Martin Landfall, Lev Livnev, and Lucas Vogelsang. Another fact to note about the Chia token is that it operates on its on-chain programming language called Chialisp.

Chia Blockchain's Native Features

Aside from having a unique programming language, there are also incredible features that make it easy and safe for you to invest;

Slow Paper Wallet

This feature allows you to safely store the smart transactions that might delay you from accessing your funds in your hot wallet. However, this feature is not an alternative to your private key.

Clawback Escrow

This is a feature that allows you to take back or reverse a withdrawal process after the transfer proceeds to the Blockchain. So, you can "clawback" your funds after you have initiated a withdrawal process within a period.

Colored Coins

The Chia Colored coins allow you to create transient values and different applications on the Blockchain. Because this process doesn't usually produce flash loans, it is easy to do.

These features are innovative and a great way to help new users get into investing in the Chia token.

How Does Chia Work?

Chialisp operates very similarly to Ethereum's language known as Solidity. Hence, Chia is often compared to another Ethereum-powered coin called DAI. Similar to DAI's smart contract cDAI, Chia's smart contract Chia. sol deposits your DAI into the DSR. Once this process is completed, you will be issued Chia tokens which you can either store, trade, or transfer. Another amazing feature of this process is that it supports gasless token transfers.

Aside from enabling smart transactions, Chialisp also creates multiple creative, decentralized applications such as multi-signature wallets, colored coins, and recoverable wallets. However, the potential of the Chia network does not stop at just creative applications. It is also designed to reduce the cost of mining in comparison to Bitcoin and Ethereum.

The Chia network uses a Proof of Space and Time (PoST) algorithm as opposed to Bitcoin's Proof of Work (PoW).

Chia's Proof of Space and Time (PoST) Algorithm

If you're conversant with Bitcoin's algorithm, you know that it relies on different miners of the Blockchain to solve very complex mathematical problems. This process of solving complex problems is known as the Proof of Work (PoW) and is essentially what validates multiple transactions on the Chain.

This method has been used for mining multiple cryptocurrencies, however, the energy needed to do this process is so much. The electricity needed to mine different blocks is reported to be enough to run multiple countries. To combat this impact, many miners now use the Proof of Stake (PoS) method. This process offers validation for the next block based on the number of tokens currently stored on a Blockchain. Although it requires less energy, it isn't as effective as Chia's method of validation.

The Proof of Space and Time (PoST) algorithm requires miners to use unused computer storage space with strings of digits. This makes it easier for miners to successfully win a block on the network because all they have to do is purchase more SSDs.

Here's How It Works

The Proof of Space method is a cryptographic method that works with Proof of Time as a consensus method. On the Chia network, you need to prove that you are keeping unused storage on your hard disk. This storage will be scanned by farmers (network participants) via special software installed on your computer.

You win rewards when you have more space compared to the network. This algorithm will potentially;

1.Verify transactions without overly expensive electricity bill

2.Significantly reduce the negative energy impact caused by crypto technology

3.Maintain the decentralization of many Blockchain-based applications at lower costs.

Chia Enables Predictable and Favorable Market Cap

Another potential of the Chia token is the ability of investors to predict the possible future market value as time progresses. Based on the consensus method of the PoST and PoT algorithm, you'll be able to calculate the expectations of the total supply at a specific time. Hence, investing becomes easier and less stressful.

According to the whitepaper, the company will begin its main et with 21 million XCH and you can start earning immediately. And it is predicted to double in at least six years. Although bitcoin maxis focus on the hard cap, Chia communicates that a fixed amount doesn't matter.

Conclusion

The Chia token is an ERC20 token designed to enable and make home mining feasible again. Since miners can win a block by simply acquiring as much unused storage space as they can, it makes the process easier. Plus, it cost less and has zero impact on the environment. With incredible features, a steady, predictable market value, and an easy & green mining process, Chia might be the next popular token to invest in.

About BitForex:

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BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts,  derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.

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