What is Chia?
Chia network is described as a blockchain with smart contracts that is secure, fast and easier to use than cash. (I think the cash claim is more of an ambition statement at the moment) It is designed to not rely on specialized equipment like ASIC miners but rather what you have in your home or in a commercial data center. Instead of using power intensive GPU’s or ASICs, it utilizes spare hard drive space (only 5–10 watts power consumption for hard drives vs 90–3400 watts for GPU/ASICs). By design, just about anyone can participate and put their computer to work. This is part of what makes Chia network so secure, it is highly decentralized.
Does investing into Chia make financial sense?
Long story short, no, not right now it doesn’t. That is, unless you don’t mind a smaller return for your investment. Chia’s intent was not focused on everyday people buying up all of Amazon and Best Buy’s hard drive inventory. It was designed to take advantage of excess storage capacity which makes it ideal for data centers to subsidize the cost of equipment. For us retail investors, well, intent holds as much weight as a recommendation. After all, we all do what we want in the end. That brings us to comparing two distinct investing strategies — farming vs liquidity mining.
Comparing Chia to other investment opportunities:
Let’s look at where we could place $60k in capital. In this example, we are converting our USDT to Cake and staking it in Syrup pool on PancakeSwap for a cool 89.68% return that is compounded daily. Our monthly take would start at $3241 and after a year we would see a return north of $50k assuming the interest rate stays above 85% for the duration.
Comparatively, if we keep farming our 1.4 petabytes of Seagate platters, we are looking at a return of $2741/month (assuming a stable exchange rate of $245/XCH). After one year we would have $32,892. We could factor in an additional 3.65% return if our XCH is on Gate.io but it does not move the needle much.
We see between these two examples a $17k disparity. Looking purely at the numbers, the obvious choice would be liquidity mining on a DeFi pool like PancakeSwap. This may be enough justification to avoid Chia farming altogether and no one could fault us for that decision. When we add in the labor to assemble an elaborate server along with the technical learning curve if we are not already IT professionals, then this might not be the project for us. In fact, I often ask myself if this make sense and for me, it comes down to this: 1) I like the project. It has a sound concept and a good team behind it. 2) Giving the project a year or two to mature we should see new partners and use cases. 3) I love messing with hardware. Having computational power to apply to new projects is just plain fun. 4) If the project fails, I can redeploy the hardware somewhere else; if a liquidity pool dries up, I will suffer what is known as impermanent loss…fancy speak for poof…your Cake tokens will not be worth much.
In Conclusion
Whether Chia is worthwhile or not is a very personal decision. Some will base their response purely on monthly cashflow generation. Others will look at their ROI period. No one wants to tie up their capital for too long. Others still will look largely at the risk factors. I say all of this matters and let’s not forget one of the most important principles…make time for who and what you love!
As new use cases come to market, Chia's value will begin to retrace back to levels that attract more investors. Our patience will be a key aspect for the Chia project. Let it crawl, then watch it walk and one day we can celebrate when Chia runs…all the way to the bank!
