An expert's point of view on a current event.
May 23, 2021, 6:00 a.m.
Bitcoin, the first cryptocurrency, has a problem: it consumes terrible amounts of electricity and thus generates as much carbon as a medium-sized country. This is by design. A new cryptocurrency, chia, avoids this problem – in favor of generating large amounts of another type of waste.
Bitcoin should be decentralized to avoid centralized control. In “proof-of-work mining”, fresh coins are awarded by lottery. You participate in this lottery by guessing numbers and calculating them as quickly as possible. That means you are wasting electricity demonstrating your commitment. There is a winner every 10 minutes. The more people participate in the lottery, the harder it becomes to stick with a winner every 10 minutes.
As long as people can make money wasting electricity, they will add more computing resources to win more bitcoins in an escalating arms race. So Bitcoin uses as much electricity as the Netherlands.
Evidence of work has economies of scale: the bigger you are, the more efficiently you can create lottery tickets. Despite the grandiose claims of putting financial power in the hands of the public, Bitcoin mining was functionally centralized by 2014. The bulk of bitcoin mining is made up of three large pools. A power outage in a small area of Xinjiang in April 2021 took a quarter of all Bitcoin mining offline. Bitcoin mining also uses specialized computers that only compute cryptographic hashes as quickly as possible. Once the mining computers are obsolete, it will only be e-waste.
Other cryptocurrencies are similarly wasteful. Ethereum uses as much electricity as Peru. There are smaller cryptocurrencies that don't use this process, but Bitcoin and Ethereum are the two cryptos that can be largely exchanged for real money. Cryptos have failed as a usable currency, so their only remaining use case is to be traded in hopes of real money.
Bram Cohen is famous for being the creator of the hugely popular BitTorrent file distribution protocol. Cohen turned to the problem of proof of work. He specifically wanted a “green Bitcoin”, which is why Chia, founded by Cohen, works very similarly to Bitcoin, apart from the proof of work. Chia's business white paper advocates the same conspiracy theory economy adopted by the Bitcoin subculture: it assumes that governments fundamentally cannot be trusted to spend money, and that wasting electricity worth a country is a better alternative is.
The resource Cohen used for his so-called green cryptocurrency Chia was the computer's hard drive space. This is a generic, reusable form of computer hardware that is widely available and he thought it would use less power than a proof of work. Cohen believed that casual Chia users might be able to use "the unused memory on your laptop, desktop, or corporate network."
In order to “manage” Chia, the software writes a “plot”, a large part of cryptographic data, on the hard drive. The Chia blockchain software sends a "challenge" about every 18 seconds, about 4,608 times a day. If you have a sufficient answer to the challenge, you will win two fresh chia tokens. The more space that is added to the network, the more difficult the challenges become.
Cohen's company, Chia Network, secured venture capital funding in 2018 and developed the Chia software. The network was launched in March 2021 with the promise that users could operate it in a “normal home”. In Chia's business whitepaper, it is assumed that the hard disk space is “overloaded”. However, aspiring chia farmers were buying hard drives in bulk, thousands of terabytes at a time – since they just had to spend less money than they expected to make back.
During the COVID-19 pandemic, manufacturing supply chains were already disrupted in several industries, resulting in a shortage of many basic components. By April, just a month after it was launched, chia farmers weighed on the hard drive market. Reports from Hong Kong of large hard drives over 4 terabytes in price tripled. Hard drive shortages and price increases have been reported in Southeast Asia and the United States.
Chia's first plotting is usually done on a solid state drive (SSD), such as you can find on a desktop or laptop. In normal use, a modern SSD will last over a decade. An SSD Chia plans to burn out in less than six weeks. SSD manufacturers are now refusing to provide guarantees on SSDs used for crypto mining. Used SSDs and hard drives manufactured since 2021 can no longer be classified as burned-out wrecks. In Germany, the popular cloud service Hetzner has banned chia farming.
Instead of carbon dioxide, Chia produces large amounts of electronic waste – rare metals that have been assembled into expensive computer components and turned into toxic, almost non-recyclable landfills within a few weeks. Cohen tweeted that the claim that Chia destroys hard drives is largely "just false" – although he ends the tweet thread by effectively admitting it is true, but the users for using "consumer SSD" accused although Chias own FAQ states that it can run on cell phones or laptops.
Plotting chia is also very electricity-intensive – plotting requires arbitrary calculations by the central processing unit (CPU) of a computing device, an intensive task. Chia's business whitepaper calls for “a Raspberry Pi” (a small computer about as powerful as a 2007 iPhone) to work on. In practice, however, plotting Chia requires multiple CPU threads running continuously at close to 100 percent.
Chia failed at decentralization for the same reason that Bitcoin failed: centralization is more efficient. The largest chia pool, HPool, wins 36 percent of the chia farming rewards and grows. Smaller chia farmers have complained that Chia Network gave HPool a head start. The first 21 million Chia coins were pre-created and held by Chia Network to be distributed by Chia Network in the event of an IPO.
Chia came across the well-known psychology of cryptocurrency mining headfirst: People will do anything that generates a net profit – and damn the externalities.
Cryptocurrency mining has also destroyed the computer graphics card market. Bitcoin mining uses special chips that can only be used to mine Bitcoin. However, Ethereum and many other "altcoins" that use proof of work are still mined on graphics cards because they are well suited for complex numerical calculations. With the price of Bitcoin in an economic bubble, so have the other coins; Therefore, high-end Nvidia graphics cards are next to not available. Prices go up and the cards are snapped up as soon as possible. The latest Nvidia cards have resorted to drivers – the software that runs the hardware – that detect and block cryptocurrency mining. And just like with hard drives, you can't trust that used graphics cards aren't burned-out wrecks.
Almost any service that can do general calculations is instantly inundated with parasitic crypto miners. Continuous Integration (CI) systems use computer program source code and re-create it after each change to enable rapid testing of all changes. Some public CI services used to offer a free tier for small projects. However, crypto miners started spamming these services with CPU based crypto mining. One CI service technician said, “For example, if a team of 20 had been working on our CI offering, we would have reassigned at least 50% of them to work full-time on combating miners. And this trend is not slowing down, it is just accelerating. "
The decentralization of cryptocurrencies is a performative waste of resources to avoid having to trust a government to issue currencies. However, since cryptocurrencies do not act as currencies, only new types of otherwise worthless magic beans are generated that can be sold for real money. Your system wastes unlimited amounts of resources that you throw away – and encourages the theft of resources that other people can waste to make money.
Cryptocurrency spits out carbon dioxide and mountains of toxic e-waste, makes basic computer hardware that could be used for productive purposes unavailable, and destroys any kind of commons that anyone would want to offer to the world if general calculations could be done on it. Decentralized cryptocurrencies are a cyberpunk parody of unregulated capitalism. By their very nature, they are a catastrophic consumption of resources for the world. The designers are only looking for new resources to abuse. The only functional purpose of decentralized cryptocurrencies is to promote idiosyncratic economic ideas for Bitcoin that don't work in the hope of making money from speculation. Every cryptocurrency is a new form of waste – and the only way to stop it is to stop cryptocurrencies.