Over the past decade, cryptocurrencies such as Bitcoin and a plethora of other competitors have grown from odd curiosities to arguably establishing new, more open and secure currencies and transaction methods tied to a principle known as blockchain. Without getting into too much detail, blockchain is a distributed method to store and verify transaction registries in a manner that is verifiable, secure and not controlled by a single entity. Most blockchain implementations such as Bitcoin rely on a proof of work consensus algorithm which requires highly compute-intensive hardware – powerful custom processors and GPUs – to perform transparent verification, rewarding participants with a small amount of newly-minted currency. This verification process is essentially the so-called “mining” operation. Mining Bitcoin requires increasingly powerful and expensive equipment, consuming vast amounts of energy to maintain and, as a result, has become controlled by fewer and fewer parties able to sustain the hardware and energy costs.

Chia, a San Francisco-based company incorporated in 2017, seeks to use a proof of space and time verification algorithm, which relies on available data storage space to maintain a series of cryptographic numbers in “plots.”  Storing these cryptographic plots onto available HDD space is called “farming” and is critical to reducing the dependency on ever more powerful computational devices and high power consumption that mining techniques in proof of work implementations require. The proof of time portion uses a verifiable delay function (VDF) requiring sequential computation by relatively few fast servers that perform as “time lords.”  The sequential nature of the calculations required to execute the VDF means that maintaining a large number of parallel machines does not benefit the verification process and thus also reduces the power consumed.

Chia launched its mainnet to provide farming rewards on March 19, 2021 and is targeting to go live with transactions on May 3, 2021 around 10am PDT. This has resulted in a mad rush to deploy storage to allocate to plots in anticipation of farming Chia currency and recent articles on technology websites point to significantly increased demand for storage coming out of China, targeting Chia farming. Accelerated demand for both SSDs and HDDs was noted in several articles; however, TRENDFOCUS analysis has found that a recent uptick in nearline HDD demand likely related to this Chia storage rush has transpired out of China over the past two weeks, although overall OEM SSD demand increases have been less clear.

As transactions go live in early May, the sway of Chia in the cryptocurrency world will become quickly apparent and promises – or perhaps threatens – to drive incremental storage capacity requirements on top of recovering cloud and corporate spend in both the U.S. and China, which already promises to tighten up storage supply to the growing demand. Demand for systems allocated to Chia farming will also further strain semiconductor supply, exacerbating shortages that have impacted a wide range of industries. However, over the long-term, success for Chia could result in a meaningful upward inflection in storage absorption, much like current proof of work blockchain implementations have driven demand for GPUs and custom ASICs through the roof. Beyond storage, Chia’s success would demonstrate a cryptocurrency that could significantly reduce energy consumption compared to existing platforms. While the hype surrounding cryptocurrencies has fueled the belief that blockchain will reshape the future of transaction processing, companies in this space face increased scrutiny of the environmental impacts of these technologies. At a time when investors are judging companies through the lens of environmental, social and governance (ESG) frameworks, environmentally sustainable solutions are targeted to win out in the end.

While large pools of available storage to farm plots may mean that vast deployments dedicated to Chia farming may eventually dominate the landscape, for now, anyone can establish Chia plots on a wide variety of compute devices, including Windows 10, MacOS computers and even on inexpensive Raspberry PI devices. Software can be downloaded from Chia.net where the company recommends a fast SSD to store temporary plot data and a large HDD to store final farming plots. A basic k=32 sized plot (with k representing the space parameter) will require around 356 GB of space and result in a final plot size of nearly 109 GB. Some interesting details on storage requirements can be found here: FAQ · Chia-Network/chia-blockchain Wiki · GitHub. Note that creating many plots using a consumer-grade SSD for temporary files is not recommended (enterprise NVMe devices are suggested), although temporary plot data can also be stored on slower storage with the final plots stored on HDDs. Instructions for downloading the Chia app can be found at Home – Chia Network.

New applications for storage beyond the growth of certain existing markets come along infrequently and cryptocurrency solutions such as Chia that leverage the distributed security of blockchain without exacting a significant environmental toll from vast energy consumption are exciting developments. TRENDFOCUS will continue to watch the Chia story closely to see if it becomes a sustainable next wave of cryptocurrency growth and, more importantly, determine how the solid state and HDD industries will manage the new potential opportunity to sell storage capacity.