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# What is Proof of Space and Time?

March 17, 2022 - 10 min read

#### Proof of Space and Time Can Alleviate Environmental Concerns While Reducing the Power of Blockchain Whales

Proof of space, sometimes referred to as proof of space and time, is a novel consensus mechanism that is remarkably different from previous types of consensus methods, such as proof of work or proof of stake. Some blockchains use a combination of these consensus methods.

Proof of work, which is used to mine Bitcoin and Ethereum, requires node operators to solve increasingly difficult mathematical problems in order to earn the ability to validate the next transaction, in exchange for a small amount of the blockchain’s native token or cryptocurrency. Proof of stake, in comparison, requires node operators to stake, or lock up, a specific amount of a blockchain’s native token or cryptocurrency in order to gain the right to validate the next transaction and earn a specific reward. Solana and many other major blockchains use proof of stake, while Ethereum is attempting to move away from proof of work to a proof of stake consensus model.

In contrast, proof of space allows an individual or an individual node to take part in the consensus process of a blockchain without using proof of work or proof of stake. It does this by allocating a certain amount of computer hard drive space for a certain period of time to validate blocks and/or participate in the governance of a blockchain. Sometimes, proof of space and time is also called proof of capacity.

The more space a node operator reserves on their hard drive, the higher the chance of matching the necessary hash value from a predetermined list, giving them a higher chance of winning the mining reward. This is similar to a lottery in which a player wins by matching the highest amount of numbers on the winning ticket.

Note: Throughout this article, we refer to proof of space and proof of space and time interchangeably, as they are essentially the same consensus method.

### The problem with current proof of work consensus mechanisms

Developing a consensus method that is both relatively egalitarian and environmentally friendly has been one of the biggest problems in blockchain in recent years. The energy-intensive proof of work consensus method, used on the Bitcoin blockchain, has come under fire for increasing environmental concerns. For example, it’s estimated that approximately 2% of the world’s current electricity output is used to mine Bitcoin, something which greatly increases both pollution and atmospheric carbon dioxide levels.

### Why proof of stake is better for the environment, but not necessarily more egalitarian

The most common alternative, the increasingly popular proof of stake, which is currently in the process of being deployed on the Ethereum blockchain, is significantly more environmentally friendly. However, proof of stake requires significant financial resources.

For instance, as of January 2022, ETH, Ethereum’s native currency, currently has a market cap of more than $447 billion, a reasonable amount of which is currently staked for governance purposes. For any one validator node or group of nodes controlled by the same operator to have reasonable power, they would likely need to stake many millions, if not billions of dollars of ETH. As of January 2022, simply staking one validator node requires 64 ETH. With the price of ETH being$3,765 as of the writing of this article, running a full node would cost more than $240,000, excluding any costs for hardware setup. With the median U.S. income sitting at$41,535 as of 2020, this means running a full node is far out of reach for all but the wealthiest of Americans. Of course, there are other options, such as running a limited node or joining a staking pool, but these provide even fewer governance powers to the individual node operator.

As of December 2021, there are 11,259 full Ethereum nodes running across the world. The largest staking pools, which themselves run hundreds of nodes, are quite massive as well, with the Ethereum 2.0 pool (run by the Ethereum Foundation) currently staking with 6.9 million ETH ($21.3 billion worth), and Wrapped ether (WETH) coming in second, currently holding 6.7 million ETH ($20.6 billion).

While it naturally makes sense that the Ethereum Foundation would hold a “controlling stake” in Ethereum, the general expense of running a node and the concentration of large staking pools means that the governance of the Ethereum blockchain is far from democratic; one could say that it’s more like an oligarchy controlled by a small group of “digital whales” which make most of the decisions for the network as a whole.

This is neither an inherently good nor bad thing; however, those thinking that blockchains like Ethereum represent true community governance, or that the “average joe” can have a significant influence on network governance, are sorely mistaken. Hence, there is a strong desire for other consensus mechanisms that can provide a more egalitarian approach; those in which the “average joe” could have somewhat of a say in how the network is governed. That’s where proof of space may be a workable solution.

## Blockchains currently using proof of space and time

### The Chia Network

The Chia Network, founded in August 2017, is currently the largest blockchain utilizing the proof of space and time consensus method. The blockchain was specifically developed for DeFi payment systems, in order to decrease costs and improve the efficiency of blockchain transactions.

The Chia Network utilizes a new smart contract programming language called Chialisp, which Chia intends to be more easily auditable, more transparent, and more secure than other alternatives. It also claims to have a forward focus on developing new cryptographic tools to increase the security of its smart contracts.

Current advanced smart contract transactions available on the Chia Network include:

• Atomic Swaps: These are automatic smart contracts that permit users to trade tokens from different blockchains using the same smart contract.
• Recoverable Wallets: Recoverable wallets can be recovered with alternate means other than mnemonic phrases and passwords. Chia has mentioned little about how this process works in practice.
• Authorized Payees: These are wallets or smart contracts that can only send or receive payments from pre-authorized wallet addresses or smart contracts.
• Rate-Limited Wallets: Rate-limited wallets can only send or receive a specific amount of currency over a specific period of time.
• Clawback Escrow: Clawback escrow allows a user to cancel or reverse a withdrawal process after it’s been validated on the Chia blockchain. This allows users to retrieve their funds after a certain time frame and is particularly useful if the user on the end of the smart contract attempts to engage in theft, fraud, or other forms of malicious activity.
• Slow Paper Wallet: A slow paper wallet permits users to safely store smart contracts in a hot wallet.

Like many other blockchains, the Chia Network has a native cryptocurrency, also called Chia (XCH). Its consensus method consists of a proof of space and time model. Using the proof-of-space consensus model, users can farm Chia utilizing either a solid-state drive or a traditional hard disk drive by using their empty storage space to record transactions on the blockchain, allowing their drive to act much like a node on a more traditional blockchain network.

Farming can be done on desktop computers, corporate computer networks, laptops, and even mobile devices. The chance of a farmer winning a block is calculated by the amount of drive space they offer compared to others on the overall network.

In addition to proof of space, the consensus model incorporates proof of time, which requires a small interval of time between block validation, which is enforced using a VDF, or verifiable delay function. This means that utilizing many parallel machines for farming on one node will not provide a miner additional rewards. This does not, however, prevent farmers from running multiple separate nodes.

Ideally, this makes the network far more decentralized, as it’s much easier for the average crypto enthusiast to begin mining Chia than currencies like Bitcoin or Ethereum, which, as of 2022, generally require industrial operations. However, there is nothing stopping farmers from stocking up on huge amounts of storage space in order to increase their mining rewards, which could lead to centralization or mining “whales” in the future.

Like some tokens and currencies, including Ethereum, Chia retains a strategic reserve of its currency (which it refers to as pre-farm), which it believes will help stabilize prices and reduce market volatility. Like Bitcoin and some other currencies, Chia engages in halving intervals for their mining process in order to reduce currency inflation. Specifically, Chia offers rewards in 10-minute intervals, which are halved at precise intervals in the future (specifically, at the end of every third year for the first 12 years). After this, Chia rewards remain constant.

Perhaps most interesting, Chia has issued a new type of token, called a colored coin, that offers a wide degree of flexibility for users. This allows users to create their own stablecoins based on the Chia token and can utilize many of the functions mentioned above, including clawbacks and rate-limited wallets.

### Filecoin

Filecoin is a blockchain-based network specifically designed for secure decentralized data storage. Like many public blockchains, Filecoin is open source and users can build apps on top of it.

Filecoin allows users to operate nodes, which it calls Lotus nodes. They can do this both on traditional computers and in the cloud. Nodes provide the decentralized data storage function for the Filecoin network, as well as allowing users to mine Filecoin’s token using the proof of space and time consensus method.

As of January 2022, Filecoin’s native token, FIL, was priced at slightly over $36 and had an impressive market cap of$5.3 billion.

### Proof of Space is a Promising Consensus Model, But Could Lead to the Same Problems It’s Intended to Fix

While proof of space and time is an interesting solution to many of the problems created by proof of work and proof of stake consensus models, it’s far from perfect. Only a few blockchains have adopted the proof of space consensus models, and not many developers have adopted the system, leading to a lack of many apps using the consensus system. Despite its perceived benefits, proof of space and time is far from perfect, and could easily end up suffering from many of the issues it is attempting to fix.

Just like traditional blockchain consensus methods, proof of space-based blockchains are susceptible to hacking, malware, and other malicious activity, which could impact mining activities and overall network security. In addition, as previously mentioned, widespread adoption of proof of space and time-based blockchains could result in a mining “arms race” where miners purchase many computers with large amounts of storage space to increase their mining capacity.

1. Hayes, A. (2021, Jun.) Proof of Capacity (Cryptocurrency). Investopedia.
2. Ledesma, L. (2021, Aug.) Ethereum 2.0 Staking Contract Now Holds the Most Ether: \$21.3B. CoinDesk.
3. Haig, S. (2020, Dec.) Ethereum flips Bitcoin’s node count. Cointelegraph.
4. (2021, Sept.) Income and Poverty in the United States: 2020. United States Census Bureau.
5. How To Stake Your ETH: Stake your ETH to become an Ethereum validator. Ethereum.org
6. FAQ: Chia Network. Chia Network.
7. Filecoin. Filecoin.
8. SpaceMint: A Cryptocurrency Based on Proofs of Space. MIT Media Lab: Digital Currency Initiative
9. Signum. Signum Network.

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