"Doomed to fail." Why Chia Coin has fallen in price and what will happen to the token

"Doomed to fail." Why Chia Coin has fallen in price and what will happen to the token

Altcoin miners have already begun to get rid of hard drives that are used to mine cryptocurrency. Experts explained how the project managed to become popular and whether it has any prospects

Over the past four months, the Chia Coin token has fallen in price by 86%. On September 7, the cryptocurrency is trading at $ 236. Altcoin capitalization fell to $ 391,4 million, according to CoinGecko. In mid-May, the value of the Chia Coin token reached an all-time high of $ 1,64 thousand.

Due to the collapse of the Chia Coin exchange rate, miners began to massively sell hard drives (HDD) and solid-state drives (SSD), which are used to mine cryptocurrency. Miners are getting rid of the equipment, since mining Chia Coin is not profitable at the moment.

What is Chia Coin

Chia Coin is a Chia Network blockchain token that was created by BitTorrent founder Bram Cohen. He believes that Bitcoin and other Proof-of-Work (PoW) cryptocurrencies are using too much electricity. Therefore, Chia runs on a Proof-of-Space-and-Time algorithm and uses disk space as a transaction validator. Users who provide their own disk space to support the network are rewarded for this.

Chia's popularity

The surge in interest in Chia Coin occurred in mid-April, as indicated by data from Google Trends. Probably, users were attracted by the unusual way of obtaining a token. To earn Chia Coin, not computing power is used, but disk space. Thus, anyone with free hard disk space can start mining the coin.

The popularity of Chia Coin led to Hong Kong experiencing a shortage of hard disk drives (HDDs) and solid state drives (SSDs) in April. Due to the increased demand for devices, their average cost has tripled.

Project development

In May, the President and COO of Chia Network Inc. Gene Hoffman announced plans to conduct an IPO (initial public offering) on ​​the stock exchange before the end of this year.

Chia Network raised $ 61 million from a group of investors that included Richmond Global Ventures and Andreessen Horowitz. During the investment round, the project was estimated at $ 500 million. The company executives note that they plan to create a trade and payment system that will be used by government agencies, banks and financial institutions.

In July, Chia Coin cryptocurrency developer Bram Cohen announced plans to launch a decentralized exchange and automated market maker. More DeFi products will be developed in the Chia ecosystem in the future, Cohen said.

Mining profitability

According to Yandex.Market, in early September the average cost of a 4TB hard drive is 10,8 thousand rubles. According to Chia's official profitability calculator, a 4TB hard drive can generate $ 0,23 per day. Monthly earnings will be $ 7,04 (512,5 rubles, taking into account the current exchange rate on September 7). Thus, the hard drive will pay off in 21 months and one week.

Mining Chia Coin on a 10TB hard drive brings in $ 0,58 per day. The average price of such a drive is 36 thousand rubles. The hard drive will provide a monthly income of $ 17,6 (1,28 thousand rubles). A 10TB drive will have a ROI of almost 28 months.

According to RBC-Crypto's calculations, in mid-July, the payback period for a 4TB hard drive was 18 months, and for a 10TB drive - 24 months and one week.

When making calculations, the official Chia Network calculator warns that the estimated profitability is based on statistical data and the real profitability may differ from that presented in the calculator. In addition, it is worth considering the increase in the complexity of mining, which occurs due to the increase in the disk space of the network due to the connection of new miners.

In May, analysts calculated that mining the Chia Coin cryptocurrency on a 512GB solid state drive (SSD) could destroy a device in just 40 days. For almost a month and a half, the drive records 256 TB of data. For the average consumer, a 512GB SSD lasts five years of use. When mining Chia Coin, 1TB SSDs last just under three months, while 2TB SSDs last almost half a year.

Does Chia Coin have any prospects?

The problem of the very idea of ​​Chia Network is the relative uselessness of the project in today's realities, says Nikita Zuborev, senior analyst at Bestchange.ru. In his opinion, due to the speed of information dissemination and the lack of an optimal data compression algorithm, the idea of ​​distributed information storage loses much to existing data centers.

“The project was deliberately doomed to failure and was created in order to“ hype ”- to collect money from tenants of facilities and distribute free tokens for the company in return, which were actually thrown into the market for free floating,” the analyst explained.

The idea to create the Chia blockchain is 100% connected precisely with an attempt to parasitize on the wave of "hype" around cryptocurrencies, Zuborev is sure. Maria Stankevich, Development Director of the EXMO crypto exchange, agreed that the excitement around Chia Coin is nothing more than a "hype". In her opinion, the price of the token was definitely artificially pumped up.

“The token was definitely“ pumped ”, the information noise was also too positive - expectations were overestimated, successes were exaggerated,” the expert noted.

Everyone who wanted to make money on Chia Coin has already done it, Stankevich is sure. In this regard, she does not recommend either buying a token or starting to mine it.