Chia Pooling and the Future 06-03-2021

Chia cryptocurrency has enjoyed a wild launch, with a MASSIVE growth in the netspace in a short amount of time. The netspace growth is good for Chia itself, and good for clients and customers who wish to utilize the blockchain network provided by Chia, but it is bad for the farmers/miners of Chia. The rapid growth of the netspace has quickly caused the difficulty to earn XCH to increase exponentially. Chances to earn in 3 months have become 6 months, and then a year, or even 2 years already. Pooling launched by third parties on proprietary protocols sitting on top of Chia gave the group HPool a vast advantage over independent farmers. The community has been upset about this, and vocal about it, and the Chia developer team has been less than elegant about how they handle these concerns IMO, not just as a farmer/miner myself. I will try to be fair in my judgement of them for it, but also critical.

The community has been pushing on the edge of being overly toxic about this issue, so it's understandable there is stress from the devs for responding to this, however, I can't shake the feeling that it is still their own fault. Bram Cohen has said on twitter and in interviews a few times to make himself clear - He doesn't care about users who haven't won yet and feel entitled, there are no freebies in Chia. He believes that not supporting pools helps to support decentralization, and that the system has been successful in decentralization. However now Chia is officially pursuing pooling, after public pressure, and many delays...

The problem with Cohen's stance is that the foundation of his assumptions are wrong, or have proven to be false over time. Believing that not supporting pools would help decentralize the network has backfired massively. HPool came out almost immediately, and dominated the netspace by a landslide, they provide almost half of the entire netspace right now as of this writing. That's 7.7 EiB out of 17 EiB. This has been going on for about a month at least now, and there have been growing concern over pools and data centres taking all of the rewards and thus, controlling the economy of the coin. When confronted about these issues, the team behind Chia has historically brushed off the issue, saying that it will settle itself over time, or that as the netspace grows, these larger players will get pushed out of the game - but the opposite has happened, they keep getting bigger, and HPool is still a massive portion of netspace.

https://twitter.com/bramcohen/status/1400273784427356161

The above tweet reflects Bram Cohen's thoughts on pooling - and why he's neglected supporting it until pressured into it.

"As always it's worth repeating that pooling doesn't increase average (mean) rewards. What it does do is make rewards more reliable. A profitable operation will be more consistently profitable. An unprofitable one will be more consistently unprofitable."

I cannot agree however. Time is finite, not infinite. Chance, when reduced to very low odds for a positive outcome with high reward vs higher odds with lower rewards, statistically, will produce equal results, theoretically. That's how statistics work, so Bram is not wrong in saying this. But he also sold the concept of Chia to the masses with a strong message that anyone could do it... Now, when I buy a lotto 6/49 ticket, I have obscenely low chances of making lots of money. But the odds are so ridiculously low, because of competition and odds in general, that this lotto could just drain my investments until I die without any rewards. Chia rewards are at this point, 6 months to a year or more depending on your storage capcity for most small farmers, and it's going to get worse. Farmers are playing the lotto every day. It's not unreasonable to expect, that with growing netspace, and annually decreasing rewards and reward chances, that individual farming is NOT as profitable as pooling, simply because, when we live in the real world, we cannot simply through infinite amounts of time at a lottery with ever decreasing odds, with hopes of equal success. It is far MORE likely, that there will be people who win more than average as independent farmers, and many other farmers independently, who win little or nothing over a time span of 3 years or more. Bram's general theory may be right, but it is not practical, and it is misguided. Assuming the netspace slows down and levels out, AND that rewards for the coin remain consistent over the years, then maybe he would have a point. But right now all I see is unofficial pools dominating the easiest reward year, and hopes that they don't dominate further. If everyone in China bought a lotto ticket every prize draw, and pooled their tickets and shared their winnings, would you really expect the pooled distributed results to equal the same result as all those people operating individually? Even over 50 years? I highly doubt that. Money begets more money too, and those who win early have time on their hands combined with those early rewards, allowing them to make new plays, while others wait to see the same opportunities with escalating difficulty. I understand that Bram wants to create a certain reward structure, but he also highly values decentralization, and I'm not sure if he realizes the contradiction his two ideas pose. But it doesn't inspire confidence.

It doesn't help the matter that anyone who wants to use official pools (which would be more secure than HPool, which requires trust) is going to have to replot all of their drives. We could have the plotting tools early, to prepare for when pools arrive, to mitigate this... But those updates too, have been delayed, further reducing the general publics ability to react when changes are introduced.

At this time all there is to Chia, I feel, is speculation. Speculation about when pools will finally release, speculation about what if any impact they will have on the overwhelming success of HPool in China, and speculation about the Chia team's ability to lead this project. At it's core, remain strong fundamentals. But the early decision making and leadership have irrefutably compromised that strength, and only time will tell if the fundamentals are strong enough for the ecosystem to survive through what has already been done.

I will keep farming with my micro-farm, and adapting to the landscape, but I think at this point it would be foolish to invest any further in new hardware for this project. And I hope Bram proves me wrong in some of my thoughts, but I will not hold my breath.

These are all my opinions, not financial advice.