Why “Chia” will never be more “Green” than Bitcoin

There are lots of Lottery contests out there with varying odds. But consider a typical, popular Lottery, the Powerball, for a moment. The odds of winning the jackpot are around 1 in 292.2 Million. When the jackpots grow in size, the market floods with people who want to buy lottery tickets. When the jackpot is low, fewer people play.

The market ebbs and flows because the winnings vary. This is a simple market force. But what if we designed a different kind of lottery, one with a FIXED, MASSIVE jackpot of say… $1 billion dollars… however as a catch, we set it up so that as more people played it, the more numbers you had to match… decreasing your odds of winning.

Clearly if only a few people played this billion dollar lottery, your chances of getting a return on your investment would be very high and your incentive to buy lottery tickets would also be high, potentially causing you to put all your money into trying to win it.

But the real question I ask you to ponder is… over time, what is your expected ROI in this design? You buy $1 worth of lottery tickets, how much do you expect to get back?

The answer is simple: $1. Period. If the difficulty of winning scales with the input, your expected output will always eventually settle on the cost of input.

This is where Chia stands. Chia shocked the market when it made it seem easy to get a stellar ROI on just a few cheap hard disks from BestBuy, however, just like in the above example, the difficulty of winning the contest scales with the number of people interested in playing… And sadly most of these Chia “farmers” are never going to see an ROI for their m.2 sticks and 18TB hard drives. At best all you can really hope for is an early win, before the network size gets out of hand.

But isn’t hard disk “farming” more “green” than proof-of-work? Well… yes… and no. Again it all depends on the difficulty scale. It depends on how you measure it. If you only look at one part of the equation, it might appear to you that “farming” plots from hard disks is clearly more energy efficient per-transaction than computing Proof-of-Work on an expensive ASIC machine… however, that is NOT the whole equation. Since the difficulty of finding a winning number is infinitely scalable, if the value of Chia is high enough, there’s nothing stopping people from filling entire warehouses with hard-disks full, floor to ceiling… consuming Gigawatts of power, spinning, waiting for the next block challenge to come along.

With this in mind, if we truly analyzed the costs, it might be found that Chia is LESS green than Bitcoin, because what happens to these warehouses of disks when they eventually go bad and need to be scrapped? All this metal and heat, wasted on a contest that intends to turn $1 into… $1.

Since both Bitcoin mining and Chia farming are essentially driven by the same market force, a contest of infinitely scaling difficulty, who, besides alarmist environmentalists and armchair mathematicians, can really say that Bitcoin mining is truly NOT green? The cost of mining Bitcoin is driven by the same market force and intends to balance an input of $1 with an output of $1.

“But but but… all that electricity is warming the planet!” you say. Well is a Tesla more green than a Hummer if the electricity you use to charge your Tesla comes from a coal plant? In that scenario, buying your Tesla equipped with an “insane mode” just makes you an even bigger douche as you waste electricity generated to charge your batteries.
But comparing a Tesla to a Hummer isn’t really fair. A Hummer weighs a bunch more and is just stupidly inefficient.

What this comparison needs, to be fair, is the balancing factor that levels out the efficiency of Bitcoin and Chia. If you were to figure out a way, for example, to ensure that Tesla’s and Hummers became LESS efficient as more people bought them… and MORE efficient as fewer people bought them, then those forces would (eventually) roughly even out until the cost of driving a Tesla and a Hummer is roughly equal, and the damage to the environment is equal as well.

So… don’t believe the hype. Chia is not the holy grail of green coins. It is not the way you’re going to get your “Lambo”. Live and learn. Move on.

To be totally fair, there are other benefits to Chia as a network. Transaction speeds being one of them. We all know that Bitcoin transactions cannot (directly) scale to meet the demands of, say, Mastercard and Visa. The slowness of the Bitcoin network is probably the biggest reason it will never really compete with “money”. However, it could probably compete with gold, which requires vaults and trucks to move it around, putting it’s market value at around $250,000 per BTC. If you consider that it might split the market with Gold, I’d put it’s value at $125,000. And if it splits the market with Doge, then you’ll probably never see BTC higher than $62,000 again, ever.

0 Replies to “Why “Chia” will never be more “Green” than Bitcoin”

  1. Great piece! Your analogy really helps clear up some misconceptions about the so-called “green crypto” scene. Bitcoin has always been the king of cryptocurrency and like you rightly pointed out, even with its power consumption, it’s hard to say whether it’s truly not green when you put it against the whole picture.

    On the flip side, I agree with your last bit about Bitcoin competing with gold rather than money. It has been dubbed as “digital gold” after all. But do you reckon there might be a crypto out there with the potential to become a true digital equivalent of our everyday money?

    Also, in the spirit of forward-thinking, how do you see blockchain technologies reshaping our lives beyond just currency exchange? For example, in the field of computer programming, digital contracts and verification systems?

    1. Absolutely agree. Blockchain technology will redefine the way security systems function, creating safer digital environments.

      1. “Safer digital environments” sure, but that’s assuming everyone codes as well as they brag they do – which is seldom the case. Hope we’re ready for the influx of “secure” smart contracts with more holes than Swiss cheese!

    2. A true digital cash crypto would need to be pretty damn fast and scalable. As for blockchain reshaping our lives, it’s beyond huge – smart contracts, supply chains, heck even voting systems could change with it.

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