Chia, the self-proclaimed “green” cryptocurrency, is inciting a mining frenzy in China and causing massive hard drive shortage around the nation.
Not yet two months old, Chia Network is already regarded as an eco-friendly blockchain. Unlike Bitcoin, which uses a proof-of-work algorithm, or Ethereum, which is now proof-of-stake, Chia created a new consensus called “proof of space and time” that leverages unused disk space for reading and writing.
In a white paper produced by Chia, the company said since it does not use processors, GPUs or ASIC mining machines as Bitcoin mining requires, it would save a large volume of electricity and be good for the environment.
The network, which launched on March 19, was created by Bram Cohen, the inventor of internet transfer protocol BitTorrent. He is among a handful of software developers suspected of being Satoshi Nakamoto, but Cohen has denied he is the pseudonymous and still-unknown creator of Bitcoin.
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Since the Chia Network’s launch, mining activities have been on the rise in China. Chia has used 2,251 petabytes of storage space, which is about 2.3 million terabytes. If each hard drive is eight terabytes, about 288,128 hard drives have been used to mine XCH. According to ChiaStatus, storage expansion is growing by 5% to 15% each day.
Chia mining takes China by storm
Chia mining and its eco-friendly branding are arriving at a critical moment for crypto-mining in China.
Given China’s ambitious climate goal — to reach its carbon peak by 2030 and achieve carbon neutrality by 2060 — the nation is now subjecting its crypto miners to stricter environmental regulations. To comply, some miners have turned to renewable energy to mine Bitcoin and Ethereum. Others have moved their mining operations out of China to countries with more crypto-friendly regulations.
Chia’s greener crypto-mining concept is seen as an attractive mining alternative.
“We have seen, obviously in China, a lot of miners already have a lot of knowledge and equipment needed to mine certain cryptos,” said Marie Tatibouet, chief marketing officer of crypto exchange Gate.io. “It would make sense that they would apply this [Chia mining] given the regulation that will be going down for Bitcoin mining by the Chinese government,” she added.
Chia miners are snapping up hard drives online and offline
The Chia mining craze has caused a run on mining equipment and parts in China and even elsewhere in Asia, both online and offline.
At the Seg Plaza in Shenzhen, one of Asia’s biggest electronic markets, Chia mining equipment, such as hard drives and solid-state drives (SSD), are in hot demand.
The electronic market located in the Futian district of Shenzhen has eight floors of electronic equipment — from computers to small parts — for sale. The fourth and fifth floors have around 20 shops that sell crypto-mining equipment and provide crypto-mining-machine custody services. At least three shops have giant banners proclaiming they provide all kinds of “Chia mining-related services and equipment” for customers.
One salesman told Forkast.News that Chia mining is the hottest mining project in China right now. His entire stock of hard drives with more than eight terabytes of capacity is sold out, and buyers must now make a reservation first and wait about three days for supplies.
Some shops still have SSD stock and professional-level hard drives, but the prices have soared dramatically since Chia’s launch.
At the Seg Plaza, an eight-terabyte Western Digital hard drive was priced at 2,000 yuan, or about US$300 when Forkast.News visited the market this week, compared to 1,159 yuan, or about US$180 on March 11, according to manmanbuy.com, a price comparison website. The average price for this model hard drive has increased 172%.
Online prices have had similar bump-ups. At Taobao, the biggest online retailing platform in China, the eight-terabyte Western Digital hard drive is about 2,699 yuan, or about US$417. The Seagate hard drive with the same storage space is 1,399 yuan, or about US$216. Higher terabyte hard drives are more difficult to find. JD.com, another giant e-retailer, sells 18-terabyte Western Digital hard drives for 4,899 yuan, or US$757.
See related article: Chia Network launches eco-friendly blockchain and XCH cryptocurrency
The Chia mining-fueled hard drive buying frenzy has expanded beyond China. As Forkast.News reported earlier this week, some enterprising buyers in Vietnam bought out almost all of the large-capacity hard drives in Hanoi and resold them to mainland China.
“While everyone is a bit more sensitive about the carbon cost of crypto, (Chia) as a green alternative is being embraced by everyone,” Tatibouet said. “This is particularly true in China because there is a hard-drive shortage as people have started mining Chia since the government regulation towards Bitcoin mining is expected to get stricter.”
Chia mining is also attracting government attention
But Chia mining also has its problems. Although Chia’s white paper declared that Chia “leverages the over-provisioned exabytes of disk space that already exist in the world today,” in practice many miners have bought brand-new hard drives for the purpose of mining Chia.
And because Chia mining requires many reading and writing operations, the life of an SSD can shorten quickly. One salesman at a shop in the Seg electronic market told Forkast.News that a brand-new SSD could only be used for two to three months and then become obsolete, unlike a graphic processing unit for Bitcoin mining that can be used for a long time and resold for other purposes, like gaming.
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All this mining activity has attracted the attention of Chinese officials. Beijing Daily, a mouthpiece of China’s Communist Party Beijing Municipal Committee, published a recent story titled, “Virtual currency squeezing physical resources is too wasteful.” The article was also reposted on People.cn, the online version of People’s Daily, the largest media mouthpiece founded by the Chinese Communist Party.
The story cited Chia mining as an example, illustrating that all kinds of hard drive prices were surging and reported complaints not only from game players but also from professional laboratory researchers.
On the government’s State Administration for Market Regulation website, Beijing Daily reported that many netizens were complaining that “buying overpriced GPU and hard drives have cost a large-scale waste of scientific research funds in all professional laboratories at all levels.”
But so far, there has been no regulation or official comment on Chia mining or hard drive shortages. As Beijing Daily noted, GPU and hard-drive prices are market-regulated — suggesting that officials will not intervene.
This week, the Chia frenzy grew even more fervent. Chia’s native token XCH officially began trading on Monday, May 3 on OKEx, Gate.io, MXC.com and other cryptocurrency exchanges. Its price reached as high as US$1,819 on May 4 and fell to just under $US600 at the time of publication.
“It has been crazy. Everyone has been bitten by the Chia bug,” Tatibouet said.
She added that investors have deposited US$10 million with Gate.io, where the XCH trading volume has been about US$3 million to US$10 million. Total XCH trading volume in the last 24 hours was about US$23.3 million, according to Coinmarketcap.