In brief
- Stocks in hard drive manufacturers have seen an uptick following the launch of "proof of space" cryptocurrency Chia.
- The cryptocurrency is "farmed" using storage capacity, with its launch reportedly causing shortages of hard drives.
Novel "proof-of-space" cryptocurrency Chia sparked a shortage of hard drives across Southeast Asia in the run-up to its launch last month. It's proved to be a boon for hard drive manufacturers, which are now seeing their stock prices spike amid the demand for their hardware.
Shares in hard drive manufacturers Western Digital and Seagate have increased since Chia launched earlier this month. Seagate shares are now trading at $98.47, up from $88.48 at the start of May, an increase of 11%. Western Digital shares have received a more modest bump, up from $70.10 on May 3 to $71.56; an increase of 2.08%.
Over the same timeframe, the price of Chia's XCH cryptocurrency has increased from around $700 to highs of over $1,600, according to CoinGecko—though the current crypto market crash has seen it slump to around $1,100.
Tesla's recent decision to pull Bitcoin as a payment option over environmental concerns has shone a spotlight on "eco-friendly" cryptocurrencies like Chia, which don't use Bitcoin's energy-hungry proof-of-work system.
That's served to push prices up—and further increased demand for the hardware required to mine them.
How is Chia mined?
Unlike Bitcoin's proof-of-work consensus mechanism, Chia's XCH cryptocurrency is mined using storage capacity.
Instead of using processing power to mine, Chia "farmers" allocate 100 GB plots on their hard drives, which are filled with hashes. When a new block is added to the Chia blockchain, its hash is compared to the hashes on farmers' drives; the user with the closest hash writes the block and receives the block reward.
That means the more plots a farmer has, the greater the chance that their plot will contain a matching hash—and that they'll receive a reward.
Because smaller-capacity SSD drives wear out quickly, Chia farmers have been snapping up high-capacity enterprise-grade drives, causing shortages and spiraling prices for the hardware.
Chia isn't the first cryptocurrency to spark PC hardware shortages, either. Earlier this week, graphics card manufacturer Nvidia announced that it would throttle hash power on its GeForce GPUs in a bid to make them "less desirable" for Ethereum miners who've been snapping up the cards.