A top exec at ‘green’ crypto firm Chia says today’s volatility is just like the wild price swings in dot-com stocks in the 90s – and that both further turbulence and regulation will ultimately help the market

Gene Hoffman
Chia President and COO Gene Hoffman

  • Gene Hoffman, president COO of Chia, told Insider the company welcomes government regulation.
  • Hoffman said volatility was ‘required’ before mass adoption of crypto and the technology that underpins it.
  • Chia coin minting uses less energy, but has been criticized for creating electronic waste.
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This year’s extreme volatility in the cryptocurrency market has troubled regulators and given big investors pause for thought. But it doesn’t faze Gene Hoffman, president and COO of Chia, the new $500 million “green” token.

“During adoption phase, volatility is almost required,” he told Insider in an interview. “It’s kind of like saying that we’re gonna adopt the internet in the late 90s without having volatility in internet stocks. Was not going to happen that way.”

In the heady days of the late 1990s, traders chased anything remotely connected to the internet. Amazon was one of the market darlings at the time and could often rise or fall anywhere up to 60% in a month in the run-up to the bust in early 2000.

Cryptocurrencies have swung wildly throughout May and June, losing as much as $460 billion in a single day last month after China – home to most of the world’s crypto mining capacity – said it would clamp down on banks to prevent them from providing crypto-related services. Furthermore, Tesla CEO Elon Musk tweeted his concern about bitcoin’s energy use, calling it “insane”. Around the same time, his company stopped accepting bitcoin as payment for its luxury electric vehicles.

Chia’s XCH token, which only began trading on May 3, has been no exception. It debuted at $1,498 and fell by two thirds in just three days. It has since swung from highs above $1,600 to lows this week below $540, according to data from CoinMarketCap.com.

But Hoffman thinks these are just teething problems before there is the mass adoption of cryptocurrencies and the blockchain technology that underpins them.

And others agree – billionaire entrepreneur Mark Cuban has likened cryptocurrencies to the dotcom bubble of the late 1990s. Cuban said in January he expects some coins will survive future crashes to become the crypto world’s equivalent of Amazon or eBay.

Chia was founded by BitTorrent inventor Bram Cohen in 2017, and promotes its “proof of space and time” process as a much more energy-efficient way of mining coins than bitcoin’s “proof of work.” The company raised $61 million in its latest funding round.

Proof of work is an algorithm in blockchain technology that is used to confirm bitcoin transactions and rewards miners with new coins. It’s also highly energy intensive and makes bitcoin one of the less climate-friendly coins out there. Rival coin ether’s ethereum network is soon moving to a “proof of stake” process, which is slightly different and is far more energy-efficient, for example.

Chia’s XCH token earns its green credentials from the energy use of its mining process. Rather than “mining” for coins, the network’s users “farm” them.

Chia “farmers” generate and store cryptographic numbers into “plots” onto their hard drives or solid state drives (SSDs) – a newer, faster type of storage device. A farmer’s plot can win the chance to create a block and receive a reward on the blockchain based on the proportion of total space a farmer has filled up compared to the whole network.

A server – called the “Timelord” – verifies the block and awards XCH tokens to the farmer in a process the company calls “proof of space and time”.

But Chia has received criticism for simply creating a new kind of waste, specifically burnt-up hard drives and SSDs. Demand for these storage devices has skyrocketed in Europe, while some IT businesses in Vietnam said they ran out of stock last month.

“There’s no free lunch,” Hoffman said. “It’s hard to say that being a thousand, 10,000 times more efficient for the same security isn’t a massive innovation.”

Hoffman also said that burning through SSDs can be avoided: “If you use the $79 cheap-y SSD and try to plot a bunch against it you might burn that up, but the $99 will last you a lifetime,” he said. “So the people who are complaining about that are buying the wrong tool for the job.”

Regulation is key to survival

Aside from bitcoin’s carbon footprint, the prospect of ever-tighter regulatory scrutiny has been one of the key drivers in the drop from the token’s record high around $65,000 in April, to closer to $30,000 now. And this hasn’t just affected bitcoin. Ether, Ripple’s XRP, meme currency dogecoin, Polkadot’s DOT, or Cardano’s ADA are all down sharply from the highs of earlier this year as a result.

Hoffman said Chia embraces government regulation – a major incentive behind the company’s plans to go public “relatively quickly,” possibly via a blank-check company, or SPAC.

“Everyone who’s kind of merged their equity with their coin has generally been doing an illegal securities offering, and that can’t scale, that cannot be adopted, that cannot become the thing that governments run central bank digital currencies on,” Hoffman said.

Part of cryptocurrencies’ appeal is their decentralized nature – no one government or central bank controls them – and the degree of anonymity they afford their users.

But Hoffman believes people want transparency.

“You want to see the audited financials and the quarterly reports,” he said. “These are not crazy ideas if you’re trying to build trust.”

And he hopes that by listing his company on the stock exchange, and keeping its corresponding XCH token as a separate asset, investors will be protected against wild swings in coin prices when using it.

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A new green cryptocurrency called Chia uses a less energy-intensive method of minting new coins. Here are 6 things to know about the digital asset before it starts trading on Monday.

GettyImages 1036181108
Cryptocurrency Mining.

  • A new green cryptocurrency called Chia (XCH) is set to start trading on Monday, May 3.
  • Chia uses “proof of space” and “proof of time” instead of bitcoin’s “proof of work” to mint new coins.
  • The rise of Chia is already causing shortages and price increases at hard drive and SSD manufacturers.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

A new “green” cryptocurrency called Chia is set to start trading next week. It was created by Bram Cohen, the inventor of BitTorrent, and uses what’s called “proofs of space and time” to “farm” rather than “mine” new coins.

The model is a less energy-intensive method of producing digital assets compared to bitcoin’s “proof of work” concept, which has led that currency to be criticized for using as much energy as some entire nations.

Chia and the company behind it, Chia Network, have already attracted significant attention from investors.

Chia Network boasts big-name backing from the likes of Andreessen Horowitz, Naval Ravikant, and Cypherpunk Holdings, according to data from Crunchbase.

The company also has attracted publicly traded crypto mining companies like iMD Companies.

“We’re going all-in on Chia,” Rick Wilson, iMD CEO, said in a recent press release. “With our extensive research, we believe that Chia is here to stay and will be utilized on a global financial level. We believe our early decision to farm Chia will result in increased revenues for iMD.”

Chia Network released a Business Whitepaper describing its new cryptocurrency (XCH) on February 9 and launched “farming rewards” on March 19.

Chia will begin transactions and trading on May 3.

Here are six things to know about the new cryptocurrency before it starts trading.

The ‘proofs of space and time’ model

The “proofs of space and time” model is central to Chia’s value proposition. The idea is that users, called “farmers,” will “seed” their hard drives or solid-state drives (SSDs) with software that puts cryptographic numbers into specific “plots.”

These “plots” are then awarded with blocks from the blockchain based on the percentage of total space a farmer has compared to the entire network. Then a VDF server, known as a “Timelord,” verifies that block, allowing the chain to move forward and awarding XCH to the farmer.

Chia Network says the system will provide better security than Ethereum and reduce the energy expenditure costs required by bitcoin’s “proof of work” model.

Read more: A 29-year-old self-made billionaire breaks down how he achieved daily returns of 10% on million-dollar crypto trades, and shares how to find the best opportunities

Hard drive and SSD shortages and price increases

Chia’s “proofs of space and time” model may be an energy saver, but the method is already creating issues for hard drive and SSD suppliers.

A recent report from DigiTimes revealed the Taiwanese memory and storage manufacturer Adata has seen a 500% increase in SSD orders since the start of April.

The South China Morning Post also reported that Chinese e-commerce platforms, including Alibaba’s Taobao and JD.com, have seen multiple models of enterprise-grade hard drives with large capacities selling out.

“Many people have inquired about large hard drives for Chia mining in the past few days,” one customer service agent at a Taobao online told the South China Morning Post.

The rise in hard drive and SSD sales is a result of the new requirements for storage to “farm” Chia.

If the cryptocurrency ends up being anywhere near as popular as other altcoins, the business model could put real pressure on memory and storage manufacturers’ supplies and pricing moving forward.

A new transaction programming language

Chialisp is Chia Network’s new smart transaction programming language.

The company says its language combines the best aspects of bitcoin’s “UTXO model” and Ethereum’s “Solidity model” to allow for more secure, less energy-intensive functionality.

To learn more about Chialisp, check out Chia Network’s introduction to the language posted by Bram Cohen back in 2019.

No hard cap, and a strategic reserve to reduce volatility

Chia Network doesn’t have a hard cap on the total number Chia coins on its blockchain like bitcoin does. Instead, the company prefers a predictable, continuous form of inflation.

“Being able to directly calculate a shared expectation of the total supply at any given time gives much the same financial and peace of mind benefit,” the company’s white paper notes.

Chia Network also holds a strategic reserve of 21 million XCH, in a nod to bitcoin, that it will use to reduce the volatility of its coin and mitigate any potential crashes.

Read more: A crypto technical analyst breaks down why ethereum is set to rise to $3,000 and is a better investment than bitcoin right now – and explains how he analyzes when to buy a cryptocurrency

Going public and embracing regulation

Unlike many other cryptocurrency offerings, Chia has a formal company behind it, and they intend to go public.

“We hope to file and list our equity in the next six to 12 months,” Gene Hoffman, the CEO and President of Chia Network told Decrypt.

Not only that, but Chia Network has also said it will embrace regulation because management has seen “scams and farces” in the space hurt investors.

“It should not be controversial that investors deserve protection through public disclosure and certainly the public shouldn’t be sold investments without that legally required transparency,” the company’s whitepaper states.

An at-home farming push

Bitcoin mining has become increasingly difficult for at-home miners due to the expansion of publicly-traded mining companies like Riot Blockchain and Marathon Digital Holdings. These companies use ASIC miners that have greater computing power than the average at-home miner could afford.

This has made it so the rewards for mining bitcoin at home no longer make financial sense for many miners, especially when energy costs are considered.

With Chia, that could change. At-home users will have the capability to compete to earn XCH by “seeding” their SSDs or hard drives and, at least for now, the lack of competition should allow for a more profitable experience.

Chia is also a very accessible cryptocurrency. Gene Hoffman, the CEO and President of Chia Network, says it was designed that way on purpose.

“It is super simple. Just download the Mac or Windows version and double click,” Hoffman told CoinDesk. “I’m pretty sure this will be the easiest cryptocurrency to validate for normal people ever.”

New cryptocurrencies are a dime a dozen, but it’s rare to see big-name investors in the crypto space come together with top developers to address a common criticism of crypto, rising energy consumption.

While no one can say whether or not Chia will be a success, it’s clear the cryptocurrency is offering something that most new altcoins don’t with its “proofs of space and time” model.

To learn more about Chia, check out the company’s business white paper zoom meeting from February 11.

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