The main differences between Chia & Filecoin is how what they store. Chia stores seemingly random data as compared to Filecoin stores users data then pulls upon it.
First we need to understand what Chai does.
Chia is a cryptocurrency that uses a “Proof of Space and Work” consensus model. This is a fancy way of saying that you use hard drives to store seemingly random information that might be called upon at random in the future. So you have a hard drive and you fill up maybe 100gb of data on it. The network goes “Hey, remember when we put 100gb of data on your drive? We are just checking that you still have it – what’s the file you have at this location?” Then if your computer can find it and give it to the network… you earn Chia!
This is a way to mint cryptocurrency and reward those that participate in the network without using GPUs or ASICs, which have recently skyrocketed in price… or using a staking or delegation method where you have to essentially loan out collateral to participate in a network. If you’re unsure what staking is, it was actually our second video published on our channel, so you may check it out if you enjoy this one!
So, this proof of space and work is not used in many cryptocurrencies, but Chia recently launched their mainnet and the price of Chia was greatly underestimated. To give you an example, a popular Chia calculator estimated it would be around $20 per coin, but as of today… The coin is over $1000.
This brings us to a point we must discuss when it comes to Chia vs Filecoin… profitability.
Right now if you have around 100tb of data, using that chia calculator I mentioned earlier, you would roughly earn $10220/month. 100tb in hard drives probably costs $3000 a month ago, so that is a crazy return on investment.
While we can give you the basics of Chia in this article, we have written a full Chia Article that you can read or you can watch our animated video below.
However, one thing to know about chia is that it works in 2 stages.
The first stage: Plotting
Think of this as clearing out a forest, tilling the ground and planting the seed.
You are essentially filling your hard drive with the data that I mentioned earlier. This process is very rough on the devices you perform it on, and it is also very slow. Right now, an enterprise-NVME seems to be the best route, and if you’re confused on what that is… check out Caleb’s video on it with the link in the pinned comment below!
The second stage: Farming
This is where the network checks randomly that you still have the data accessible.
This is not that rough on your storage device and doesn’t need to be fast – apparently Chia gives you up to 30 seconds to produce the data they want. Because of this, Hard Drives are a great option – you can buy large amounts of slow, reliable storage at a very affordable rate. One thing to note because of this is that HDD availability has gone down recently and some HDD prices have gone up. Once you plot, you never have to plot again, you can use that hard drive to “farm” chia until there is an update so major that you have to replot or until your hard drive gives out.
So now you know roughly how Chia works, and what the profitability is.
Let’s move on to filecoin.
You may be wondering why I chose to compare Chia to Filecoin, when there are other similar coins like Storj and Sia and the bittorrent coin. Well, filecoin has been up and running for a while now, their network is huge and they have access to very large resources. In fact, Filecoin raised 10 times more money than Sia and Storj’s launch, so it seems to be a fair competitor.
Filecoin is very similar to Chia. Instead of storing a ton of random data though… you are storing someone else’s files. There is a protocol titled “IPFS”, which stands for Interplanetary File System and was created as a way to store a ton of information in a decentralized manner.
One of the main goals of this project was to be able to allow people to store their data far more cheaper than what Amazon would let you store data for. Amazon is known for having HUGE amounts of long-term storage and selling it to their customers. Currently, you can store around 100tb of data for around $74 a month and it would cost around $1342 to do the same on an Amazon server. Granted, in Filecoin, your files are encrypted and stored on a bunch of people’s computers, while at Amazon, they are stored in secure places and regularly serviced.
FIL is Filecoin’s native token and is given to those who “farm” it by essentially renting out their hard drive space. With it, they can sell it for USD, keep it as an investment, or spend it on the network to buy storage space.
One of the main advantages to Filecoin is its usefulness. For example, if we add a miner to our garage to mine bitcoin, what is it doing? It’s essentially doing a bunch of computations in hopes of getting lucky. What about Ethereum mining? It’s essentially doing the same thing. At the end of the day, these calculations don’t really matter – they do nothing for us. Even Chia is putting a bunch of useless data on hard drives, even though it’s much, much more eco-friendly – all of these big players are using hardware for essentially no reason other than to keep the network secure and more difficult to attack – as more people join the network, more hardware is required to achieve the same goal.
That’s their purpose too – they want it to be easy to join the network (so you get the decentralization effect) but also not so easy that you can’t just own the network (so you don’t get whales).
With Filecoin, though, you are essentially renting out your hard drive to someone who wants to do something useful with it. They are storing encrypted files on your hard drive.
You might be wondering what the legal issues of this are – what if someone stores something very illegal on a hard drive that you are renting out? Well, technically that data is completely encrypted using military encryption. They couldn’t break it if they wanted to – and if they did, it would break the reliability of the network. Part of this decentralized storage cryptocurrency is the reliability that the data you store is completely encrypted and can’t be peaked at by those that are hosting it.
In terms of profitability, there’s not really any Filecoin calculators out there, but if we use the same price that it cost to rent space, we can assume that 100tb would only earn you around $74/month – compared to Chia’s current $10,220. This is why Chia has blown up in the past few weeks.
So now that we have both sides of the puzzle it leaves me with a question – why is Chia storing random hashes making 100x the return on Filecoin storing important data?
Thank you for reading and hopefully our article helped, if you have any questions don’t be afraid to reach out!