Can cloud storage mine my crypto currency?

Chia: The rush for new cryptocurrency could make SSDs and hard drives very expensive

The good news: A young cryptocurrency, Chia (XCH), promises to solve some of the problems posed by the top dog Bitcoin and other established coins. These include, for example, the steadily increasing energy consumption, which is also caused by the increasingly difficult cryptographic calculations that have to be solved for transaction validation. Because this fact contributes to the fact that miners buy up graphics cards en masse and thus drive the price increase caused by the general lack of chips.

The bad news: If you want to participate in the Chia network, you can manage without graphics card arrays, but you need a lot of storage space. Observers fear that as the popularity of the cryptocurrency increases, this could lead to price increases, especially for SSDs. This phenomenon can already be observed in China.

Storage space instead of computing power

Chia was founded in 2017 by Bram Cohen, co-inventor of the Bittorrent protocol. The network (mainnet) has been online for about a month and a half, but the blockchain will only open for transactions on May 3rd. Until then, transfers can be created, but are frozen. Preparing to mine chia is already possible during the transition period, and this process is called "plotting" here. And for good reason.

Because if you want to get new coins, you need "farmland", called "plots". Instead of the "Proof of Work" method used by Bitcoin, which is based on constantly growing computing performance, the focus here is on "Proof of Space and Time". To put it very simply: the network rewards users based on the storage space they make available. The more space you offer, the greater the likelihood and amount of a reward from the network when a new block is generated for the blockchain. Writing and reading times also play a role. The system is based on the idea that data carriers are much more accessible to users than graphics cards, for example.

Investors must provide at least 101 gigabytes of storage to the network for a "plot", which is used to write and read around two terabytes of data, explains The Block. Then a file is generated and saved in a normal directory, which from then on serves as a "property" and can discard shares. However, this is based on the total space that the mainnet has, so the XCH yield per plot decreases as the network grows.

The first data carriers are becoming more expensive

In China, a run on Chia has begun since the start of the mainnet, documents the "South China Morning Post". People and companies who want to get into farming on a large scale buy up hard drives and SSDs en masse. The expected entry price per XCH - as of April 28 - has risen from just over 1,000 dollars to an average of 1,300 to 1,500 dollars. The current trend even suggests a permanent increase of over $ 2,000.

However, the prices of some data carriers in China have also increased significantly. A 12 TB hard drive from Western Digital cost the equivalent of $ 370 a few days ago at the popular online retailer, but the cheapest model is now at $ 540. Hard drives from other vendors grew even more in some cases, and a price surge was also observed for some SSDs. The buzzword "hard drive price increase" even landed in the trends of the Chinese social network Weibo.

Should Chia get a similar response internationally, this development could continue. It should also be borne in mind that the lifespan of hard drives is mechanically limited and that flash memories, such as those found in SSDs, can only be overwritten to a limited extent.

In addition to the share increase due to the purchase of new storage media, the read and write operations for the network also increase the wear and tear on data carriers that have to be replaced by the "farmers". It remains to be seen whether the ecological balance of Chia will be better in the long term than Bitcoin and Co due to the lower energy requirement. (Georg Pichler, April 28, 2021)