Chia, the so-called “green bitcoin”, has been aware of the high energy consumption of bitcoin since August 2017, so its mining method has changed from graphics card mining to hard disk mining, avoiding the disadvantages of highly centralized and high energy consumption of bitcoin mining, and the definition of “green bitcoin” is also highly consistent with the current national policy of “carbon peaking and carbon neutral”.
On May 4, 2021, at 2:00 am, Chia was launched on OKEx, the world’s leading trading platform, and several second-tier trading platforms. As of May 7, 2021, XCH price stabilized at around 600 USDT. It is not difficult to speculate that the reason for the up and down price curve after the last house is the dumping of the early miners back to the capital.
So is Chia, which is growing at such a breakneck pace with such momentum, still worth it for miners to get involved in mining? Is it still a good time to get on board? I conducted a wave of analysis on this project, hoping to help friends who want to invest money in mining.
A. Chia white paper analysis
1、The basic content of Chia
Chia is a new public chain that can delay and revoke the transfer of digital assets, a function that can be derived from many applications. chia aims to become the first publicly tradable “ETF-like” crypto asset, becoming a crypto asset used by sovereign states, financial institutions and enterprises in daily business.
It is reported that the main network of Chia project just went online on March 19, 2021, with a total of 42 million coins issued and an annual output of 3.3 million coins in the first three years, and only 400,000 XCH coins have been mined so far. And Chia does not have private placement, currently only mining channels to obtain, but the team has a pre-mining mechanism. At the moment Chia is soaring hot, the head mining stage miners gain a lot.
2、Chialisp underlying language analysis
Chia technically innovative invention of a new programming language – Chialisp. according to the official description, Chialisp is Chia launched intelligent transactions programming language, powerful, easy to audit, safe and reliable. Currently available reference smart transactions are: Atomic Swap, Authorized Payee, Recoverable Wallet, Multisig Wallet and Interest Rate Restricted Wallet.
The most important feature and the biggest advantage of Chialisp is that it retains the UTXO model while adding the functionality of the Ether Solidity model, thus making it more powerful.
The first class of objects in Chialisp are assets, and transactions become short-lived tweaks that destroy some objects and create others. Whereas in Bitcoin, transactions are the first class of objects, and Tokens (UTXO) are represented as a kind of transaction ID and output number. transactions occurring in Chialisp are simultaneous, and Chialisp programming greatly simplifies the format of Tokens (UTXO) to include only primary inputs, puzzle hashes, and quantities.
At the same time, Chialisp is a Turing-complete language and will be much simpler than the Solidity model of Ether because the execution is ephemeral. the Chialisp language has the necessary primitives for computing Token IDs and Tokens can declare their own IDs, thus supporting explicit self-referencing and effectively avoiding the use of the self-generating program Quine.
- Analysis of Bitcoin and Chia’s pass-through economic model
The total number of bitcoins is 21 million, and the mining reward is halved every four years. chia’s incentive mechanism is directly based on bitcoin’s reward mechanism, so the total number of farming rewards given by XCH is also 21 million, and the farming reward is halved every four years. However, the total number of XCHs issued by Chia is 42 million, as Chia set up 21 million XCHs for pre-mining at the mainnet launch.
- Chia pre-mining analysis
The 21 million XCH mined by Chia pre-mining is used as strategic reserve. The strategic reserve will not be used for sale and distribution, and the company intends to use the strategic reserve for, but not limited to, the following purposes:
(1) Lending Chia to governments, financial institutions, market makers and corporations for their Chia-related projects, such as asset issuance, payment of international invoices and providing liquidity on various digital asset trading platforms.
(2) Using Chia to fund shareholder activities, such as share repurchases or dividends to shareholders, after publicly registering an equity interest.
(3) Using Chia to invest in promising projects to expand Chia’s functionality and reach in asset and fintech markets, but not until the project has publicly registered its equity.
(4) Project parties may use Chia to add additional farming incentives (farming) or otherwise incentivize farmers (farmers) or developers to validate or develop networks or software.
- Overall Analysis
Chia’s whitepaper shows that Chia’s Token issuance model is similar to Bitcoin’s, with the main focus on “green bitcoin” out of the loop, which tends to make people overlook Chia’s own technology and strong investment lineup.
The company has created the first new Nakamoto consensus algorithm since Bitcoin, and has written a new programming language called Chialist, which makes up for all the flaws and shortcomings of the two public chains, BTC and ETH. The investment is led by top Wall Street venture capital firms Coinbase and A16Z.
The 21 million Tokens held by the team are also being used in a compliant and prudent manner.
Second, Chia invested capital value analysis
1、The data on the official website shows a sharp drop in single-T production and a rapid increase in network-wide computing power
Data source: Chia official website
The official website shows that the current single-T yield is 0.0033. From the above chart, we can see that the single-T yield shows an obvious downward trend, and the network-wide computing power has increased to 2.67 EiB at an extremely fast pace.
Chia is similar to BTC, there is a fixed time output and halving cycle, mining model is currently relatively simple, not as complex as Filecoin, the final price will determine the earnings of miners, although off-site transactions have not yet begun, but it can be predicted that the price of XCH will have a wave of upward trend in the upper house, then will attract more miners to enter, but may soon reach the balance of arithmetic power and revenue, or even the risk of excess arithmetic power.
2, miners back to the capital cycle and the annual throwback pressure analysis
Chia’s mining process has two parts missing: making a plot file (usually referred to as a p-chart because the official translation of plot is farming) and mining (officially translated as farming), on the Chia network miners are called farmers, and the rewards they get are farming rewards (Farming).
(1) Analysis of payback cycle
As of May 7, 2021, the off-site price is 600 USDT, the single T yield is 0.0033, and the cost of the miner is calculated by a miner in the market: $102,400/1P.
The electricity consumption of 1P is 2608W, and the electricity cost per P is $25 (electricity price is calculated at $0.4/kWh), and the technical service fee is calculated at 15%.
On the day of May 7, 2021, the possible payback cycle of miners is measured as follows.
102400/[(10240.003385%*600)-25/6.5] ≈ 60 days
P disk can not immediately generate revenue, need to consume a certain amount of time, calculate the p disk time and various unpredictable factors, relax the return period in about 85 days.
Generally BTC electricity cost is about 10% of daily revenue, ETH electricity cost is about 8% of daily revenue, while Chia electricity cost is about 0.34% of daily revenue. chia’s electricity consumption is very friendly for miners.
(2) Annual Throwdown Analysis
The farming bonus for miners in the first year of the XCH release plan is: 3363840 XCH. i.e. the annual throwback pressure for miners in the first year is 3363840 XCH.
On May 7, 2021, 1P will produce 3.37 Tokens per day. Miners who enter may choose to pay back their capital quickly first, so there may be a lot of miners selling off Tokens in the early stage. If the miner pays back his capital at the latest one year, and the cost is calculated at the market price of $102,400, then the average price of XCH in this year needs to be above $83. If the price is below $83, then miners whose cost does not have an advantage and miners who enter very late will be eliminated.
The inflection point prices at which miners’ earnings drop significantly are as follows.
102400/(3.37*365) ≈ $83
Because the output of 1P has been in a state of flux and shows a very rapid decline, the daily output will become less at a later stage and the price at the inflection point will be higher than $83.
(Note: The above data are all estimated contents in the current month, because the single-T production is falling too fast, we have no way to make predictions in the later stage, and there is no way to make inferences based on the current indicators. (So please make your own judgment on entry and investment at your own risk.
The current trading platform price XCH is around 3800 RMB, there is a trend to continue downward, so in the secondary market price is above 83 USD, there is still a predictable market space.
Three, Chia summary analysis
1, Chia revenue model summary
The residual value of the hard disk after Chia mining is very high, so take a step back, even in the case of Chia investment failure, miners can directly invest in other storage tracks with the hard disk, it is not possible to finally sell the used hard disk, the cost risk is effectively reduced.
The Chia pass design shows a daily output of 9216 pieces, and the official reserve will not be used for trading, and the Token mined at launch is no more than 500,000 pieces, so the Chia circulation is small.
In summary, the Chia project may attract more miners to come in later, so it may present an investment situation where the earlier you join, the higher the return.
2、Chia risk tips
From the above analysis, we can easily see that the biggest risk of Chia project is the occurrence of mining disaster due to excess arithmetic power. And Chia mining model is relatively simple, coupled with the current high degree of enthusiasm, it is likely to attract a large number of miners to participate in a short period of time, the rapid increase in arithmetic power will also lead to a sharp drop in single-T production, the earnings of miners and off-site prices show a great correlation, and the off-site price itself has a strong uncertainty.
The reason why I put the risk to the last to write is also to give you a wake-up call, although the current Chia project is very hot in the market, leading to many trading platforms have been online futures or spot, but the investment under the heat should be more careful. The effective reduction of cost and risk does not mean that the Chia project is a zero-risk investment, after all, high returns must be accompanied by high risk, please be careful to invest.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/chia-soared-more-than-200-times-is-it-still-a-good-time-to-get-on-board-and-mine/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.