Hi there,
Are you ready for spring? I’m beyond ready for more sunshine. This month I wrote articles for Business Insider and the Los Angeles Times. Next I’m hosting a free workshop on April 23 about social media and open source publishing, which you’re all welcome to join. In the meantime, I’m excited to share an essay commissioned by the Silicon Valley startup Chia Network, edited by journalist Nina Roberts.
As a quick reminder, my newsletter is not financial or legal advice, nor does any mention of a product or service constitute an endorsement. These are just my observations, for funsies!
There’s a lot to cover when it comes to the nascent cryptocurrency platform Chia Network, founded by programmer Bram Cohen and now co-led by serial entrepreneur Gene Hoffman. So let’s start by introducing Chia farmer Laura Griggs, who has been “farming” (the Chia version of cryptocurrency mining) new tokens in her home office by using eight computers, three servers and a powerful air conditioner.
Meet Laura
I found it fascinating that Griggs isn’t interested in Bitcoin at all, although bitcoin mining can also be done at home. Her interest in making chia tokens only started in early 2021; It was her first time participating in the cryptocurrency industry. Her career as an executive producer and creative director for tech events and product launches kept her busy, then such live events came to a screeching halt during the pandemic.
She wasn’t interested in bitcoin because Griggs wanted to wait for a digital asset with a more familiar business model. When Griggs heard that Cohen’s new Chia Network was planning a traditional public offering at some time in the future, she thought chia offered a comfortable blend of borderless currency with traditional accountability. So she learned how to build her own hardware for managing digital assets.
“I’ve always liked puzzles. I love to learn. This is a puzzle I’m working through,” Griggs said. “It was my first time writing down private keys [for a crypto wallet]. I went through several methods until I felt like I got it right.”
Like Goldilocks tasting the different crypto options on her table, Griggs decided Chia Network was the one that suits her. Farming chia requires less electricity than mining Ethereum and offers her a more familiar business model than Bitcoin. (Bitcoin-savvy developer Lisa Neigut wrote an excellent Chia Network explainer for beginners, if you want to learn more about the software itself.)
Simply put, Griggs blew me away. She’s a working mom who learned far more about computers in a few weeks than I have in the past four years, all while her son ran around home (because of the pandemic) in his astronaut pajamas!
Now “Farmer Briggs” receives feedback and guidance from seasoned technologists who she wouldn’t have met in any other setting. She’s been busy watching Zoom calls with chia developers, asking them questions via Keybase, chatting with “whales” (people that are fabulous at spinning cryptocurrency into profits), and reading open source documents on GitHub.
“When chia (as “XCH”) is transactional, I plan to sell some off. Eventually, I have cash flow goals,” said Griggs, “It’s a speculative risk, and I will see how it goes.”
Compared to the Ethereum mining industry, where over 55% of the network’s hashrate comes from the top four mining pools, the chia farming (aka: mining) community is relatively accessible. Within a few weeks Griggs became one of the top 100 chia farmers in the world. Griggs hopes to offer tech-support services as a side hustle someday.
“It became clear to me that a lot of corporations are looking for a way to use blockchain technology,” she added. “I’ve really placed my bet here on chia (XCH), because the other two major blockchains have fatal flaws, from my point of view.”
Considering Griggs’s journey, I think the people getting the most value out of altcoins--Chia Network or otherwise--aren’t the whales, who are likely to also be bitcoin traders that are heavily invested in many assets. The people who seem to benefit the most, beside the token founders themselves, are the newbies gaining new career opportunities by joining crypto communities.
After talking with Griggs, it’s my personal opinion that what makes Chia Network unique is its hybrid open source-startup model, making self-guided computer education affordable and palatable for a different user group than Bitcoin. Cohen and Hoffman are incentivized to offer free support services and educational tools so that more people participate in the software project. The value of Chia Network’s blockchain is defined by the degree of its decentralization, vis-a-vis other altcoins, so their community development costs are basically reallocated marketing costs.
In order to challenge the two incumbent blockchain options, Bitcoin and Ethereum, Chia Network technologists designed a system that requires far less electricity to participate.
In contrast, Grigg’s at-home farming operation ramped up her electricity bill, to be sure, yet it’s a pittance compared to what she would have needed to operate comparable Ethereum equipment and transactions. Griggs said she’s “learning as I go,” as she builds her own computers and runs her servers. Plus, the chia community calls cryptocurrency mining “farming” to indicate eco-friendly intentions. Griggs loves that vibe.
NFTs
Griggs plans to explore trends like NFTs (non- fungible tokens) after her at-home chia farm is stable. And speaking of NFTs... the latest subscriber question of the month came from Andrew Abacus, who asked why brands should, or shouldn’t, use NFTs as a form of authentication.
While I think blockchain technology isn’t the most efficient way to authenticate products, it can be an effective way to tap into a unique subculture. And if crypto companies offer infrastructure services comparable to Amazon Web Services, I see no reason why luxury brands like Gucci wouldn’t try an NFT campaign that involved authentication. (So the answer is they could, not should.)
These days, NFT platforms are overwhelmed with demand from companies that want to launch NFTs without managing the technical aspects. Blockchain networks are inherently expensive to participate in. And, so far, most NFTs are Ethereum-based. Start-ups that rely on Ethereum tell me the network failures are “crippling.”
Corporate use of NTFs only makes sense if the underlying blockchain is reliable; luxury brands could hire tech companies like ConsenSys or Chia Network to handle the technical work. Bitcoin companies could, theoretically, also meet this demand. However, historically, Bitcoin fans focus on the currency aspect. Altcoin fans, on the other hand, tend to explore corporate experiments.
The trouble with crypto use cases, like luxury NFTs for marketing campaigns, is most people don’t understand that blockchains aren’t the fastest or cheapest solution, ever. Plus, any blockchain data about a product must still rely on humans typing in the information. Let’s break down the nouns and verbs.
If it takes a hacker five hours to figure out how to use a picture of an NFT’s QR code, or how to steal an NFT from a crypto wallet to sell a $200,000 Birkin bag, then there’s enough incentive for someone to nullify the NFT authentication. Such forgery risks are already associated with the black market for counterfeit products. Perhaps a luxury brand might see NFTs as a marketing tool that engages audiences around the narrative of authentic, exclusive products. If so, that’s a tricky and expensive approach to marketing. Chia engineer Matt Howard told me that, eventually, Chia-based - NFTs will be less resource-intensive than the current Ethereum system.
“Our ‘everything is a coin’ model means that they [NFT transactions] operate independently rather than going through a central smart contract every time it changes hands,” Howard said.
But it will take a year or two, at least, until Chia is mature enough to compete with Ethereum’s hype machine. For more insights on NFTs, check out my talks with Columbia Journalism Review reporter Mathew Ingram.
Challenges ahead
Blockchain projects like Chia Network face the same hurdles that Ethereum needs to overcome, if they are to become lucrative platforms for corporate use cases beyond speculative trading.
Projects with identifiable founders (unlike Bitcoin, created by an anonymous persona) must outgrow their cults of personality. I interviewed several people involved with Chia Network and all of them listed Cohen’s reputation as a leading factor behind why they chose Chia. Cohen’s reputation is both an opportunity and a challenge, since no technologist in the Bitcoin ecosystem has comparable influence over the Bitcoin network.
On the other hand, Bitcoin is fundamentally different from startup tokens. Chia and Ethereum are smart contract platforms for business tools and services. (Many technologists are experimenting with Bitcoin’s underlying blockchain, beyond its function as a currency. So far, Bitcoin’s network incentives aren’t moving quickly in that direction.) Always remember, a blockchain network’s quality is defined by its degree of decentralization.
Thus far, the Chia Network has more than 2,000 active addresses. American investors, like Andreessen Horowitz, are betting Chia Network can attract a community of contributors that surpasses Ethereum’s, an incumbent with hundreds of thousands of daily active addresses and roughly 300 new developer contributions every month.
Ali Shadle, head of operations at Chia Network, agrees with me that women who aren’t already seasoned developers are especially likely to benefit from participating in crypto communities. The fact is, the blockchain industry is still an insular boys club.In my opinion, as someone working in the space for four years, there are very few bitcoin-centric gigs and they are hard to get. Some women gravitate toward token projects because crypto start-ups offer them accessible career opportunities. Shadle is an example of a veteran bitcoiner who got her first modern finance job with the start-up Chia Network.
“The way Chia was built makes it pretty simple, so people who are less computer literate are able to earn rewards on their computer,” Shadle said, adding that she personally holds bitcoin, too. “I helped create the UX design for Chia’s farming. So I’m probably going to buy it [chia tokens] once XCH hits smaller exchanges and then do a little bit of farming.”
Bitcoin purists will likely call chia a “shitcoin,” the term for selling false promises of global “adoption” to speculators. However chia and bitcoin offer different functionalities--even the most amazing pair of pants aren’t the best way to cover my breasts. Just as pants and shirts have inherently different designs and functions, so do bitcoin and altcoins. Equivocations are just hype. Everyone in the tech industry wants to promise revolutionary glitter! Much wow! (As John Lennon sang, “...You say you want a revolution... we all want to change the world.”)
Personally, I don’t plan to buy chia (XCH), which will probably be listed on several cryptocurrency exchanges by the end of the summer. The chia token will be transactional starting around May 3, Cohen said, and from there exchanges will probably list it based on demand. I find bitcoin more useful because I use it as a borderless currency, paying for things like freelance graphic design to editing.
Meanwhile, some fashion designers are starting to experiment with NFTs and other blockchain “use cases,” like authenticity verification. Will corporate use cases prove sustainable? Probably not, unless they find reliable software service providers to manage the tricky computer parts, just like most businesses already rely on providers like Google or Microsoft. Luxury companies don’t care if the solutions rely on blockchains or chewing gum, as long as they actually function and earn them money.
So, there you have it. That’s what I think about the vast spectrum of digital assets. What other resources do you think deserve a mention? Leave me your thoughts in the comments!
Next month I’ll address more subscriber questions about leaving New York and how my financial priorities changed during the pandemic. Plus, another subscriber commissioned a poem about New York for next month’s newsletter. That will be so much fun! Until then, take care everybody!
At first glance, I’m very sceptical about this mining model.
The fact there is no mining pools doesn’t mean it’s more accessible, but the opposite. Mining pools make mining more accessible by allowing small miners to get together and share some of the costs.
I think the fact there aren’t mining pools is only because the ecosystem is still very immature.
I don’t think this model would end up consuming less ressources with the same scale of incentives as Bitcoin. A larger part of the money would be spent on hardware, which isn’t more eco friendly, and a smaller part directly on electricity.
Sure, it can be argued people would begin by using already existing and underused hardware, but the same is already true for power sources.
So I personally don’t see the benefits of the main differentiating factor of this blockchain, but I’m excited to be proven wrong and to see how this evolves.
interesting read!