The BitTorrent creator wants to build a better Bitcoin


In 2001, a Bram Cohen, 25-year-old unemployed, dropped out of college and set up an elegant protocol for moving data over the Internet. Titanic numbers of pirated songs and movies, and countless lawsuits, later, are giving the final touches to what will hopefully be another protocol that changes the world – this time to move with money.

Cohen's first invention was BitTorrent, a specification for sharing peer-to-peer files that enchanted millions of people but angered the entertainment magnates, and at one point consumed more than a third of global Internet traffic . His latest creation is a digital currency and a startup called Chia, which aims to make cryptocurrency acceptable to the financial sector.

"I like technical problems," says Cohen, with a knowing smile. The forty-year-old solid construction met WIRED in a San Francisco skyscraper built as the headquarters of Wells Fargo, which now houses other tenants from the financial sector. Chia Network, as Cohen's startup is called, plans to move into its own space in the building soon.

After that move, Chia's neighbors will include the West Coast office of the Securities and Exchange Commission. It might seem audacious, given that the regulator puts pressure on cryptocurrency startups for elusive securities rules. But Cohen, CTO and president of Chia, is happy to have the SEC behind him.

SEC's complaints about the frothy cryptocurrency of the market have focused on ICOs or early coin offerings, where startups sell new or planned cryptocurrency units as a quick and easy way to raise capital. Cohen says he plans a more distinctive path by presenting a formal initial public offering by the end of this year, to list the shares on a small-size public stock exchange. Chia's revenue will come from helping banks build systems to use cryptocurrency with the same name for features like international transfers. The company will also hold a significant portion of the Chia coins available, which the company hopes will become a valuable asset in the long run; but it will not sell coins in an ICO.

Bram Cohen says he designed Chia to appeal to financial institutions.

Phuc Pham

To eliminate all this, Cohen must repeat its technical success with BitTorrent and avoid the legal and commercial challenges that follow. Cohen's file-sharing protocol has been a huge success and has gained interest from companies like Facebook, which used it to accelerate the distribution of internal software updates. Yet despite having raised more than $ 30 million in funding, BitTorrent Inc., the Cohen startup has been co-founded to maintain and monetize its free creation, laboriously developed to build a company. In 2005, the company agreed to work with the Motion Picture Association of America to remove links to copyrighted content from its search engine. Cohen left the daily operations at BitTorrent to co-founded Chia in August 2017 and left his post at the blackboard last July.

From a technical point of view, the Chia cryptocurrency is the result of Cohen who carefully observes the guts of Bitcoin and tries to design substitutes that are less dangerous for the planet and more attractive to the banks. "Satoshi was not a truly exceptional protocol engineer," says Cohen, referring to the pseudo-person person or people who announced bitcoins in 2008 using the name Satoshi Nakamoto.

The environmental problem of Bitcoin is rooted in the way Nakamoto's design protects digital transactions. It encourages people to run "mining" software that competes to solve cryptographic puzzles and win recently minted transaction or bitcoin commissions. Although the currency is still a niche interest, an analysis of the past year has estimated that bitcoin mining consumes as much power as Serbia, a country of 7 million people.

Cohen gives his version of mining the most bucolic name "agriculture". Similar to bitcoin, participants compete to win Chia's cryptocurrency in a competition that also processes transactions. Unlike the Nakamoto system, maximizing the chances of winning depends on the ability to accumulate disk space, without a more powerful and energy-hungry hardware. Cohen believes there are already countless spare storage computers in the world that could initiate Chia agriculture along with their existing uses. Anyone who is motivated to buy more storage just to earn cryptocurrency would not have an oversized effect on the world as bitcoin miners do, he says.


The WIRED guide for Bitcoin

The Chia system depends on two new cryptographic protocols, one that verifies the storage that a computer has committed for agriculture and the other that protects against fraud by determining which farmers win the premiums for transaction verification. Anyone curious to know the details can read the two peer reviewed documents Cohen coauthored with academic mathematicians. On Wednesday, he launched a competition that invites mathematicians to test the speed or security of cryptography behind Chia agriculture. The winners will receive $ 100,000 in bitcoins because Chia has not yet launched his coin.

When Chia's currency is launched next year, Cohen says it will be attractive to financial institutions due to its greater flexibility than bitcoins. Like Nakamoto's cryptocurrency, Chia is built around a distributed and immutable register of past transactions. But it is also designed to support custom add-ons that can automate contracts, hold funds in storage, or implement features such as chargebacks that are not supported by Bitcoin's design but critical to the way the financial system handles fraud. "The idea is to make Chia the premier cryptocurrency based on our technology," says Cohen. "A bitcoin contender, but better."

Not surprisingly, Cohen's curriculum in providing technologies that make the Internet more useful, Chia has attracted the leading venture capitalists of Silicon Valley. It raised $ 3.4 million this spring, including Greylock Partners and Andreessen Horowitz, both previously invested in the main Coinbase cryptocurrency exchange. Katie Haun, Andreessen's partner, says Cohen and his co-founder, Ryan Singer's plan for IPOs rather than for ICO, have made the company a more attractive investment. "The first ICO market is full of abuse," says Haun, who as a US Assistant Prosecutor has helped to destroy the Silk Road digital black market. "The Chia approach provides a roadmap that other cryptography projects can follow".

Chia's journey into a public list may not be regular. Singer, who recently took on the role of Cohen's CEO, expects some complicated conversations with the SEC. He is convinced that it will be worth it. "Becoming public is difficult and expensive, but we think it is an important way to professionalise the relationship between us and investors," says Singer. Previously he cofounded the first bitcoin exchange Tradehill, which he closed in 2012 saying that he lacked the transmitter license of money needed to operate.

Professionalism is not a term commonly associated with the cryptocurrency market, which has become synonymous with hype, fraud and questionable hijinks as conference catering spread out with marujuana. "In the end it's always the madness of dot com, investors must try to separate information ads," says Atif Ellahie, a professor at the University of Utah Business School. "Addressing the costs and complications of the public go could help make Chia more attractive to investors," he says.

Ellahie recently showed colleagues at Columbia University and the London Business School that some cryptocurrency investors are ready for more information. Analyzing almost 800 Ico between 2014 and 2018, which collected over $ 13 billion, it emerged that projects that reveal more technical and financial information were more likely to succeed. It is beginning to seem inevitable that US regulators will put more checks on cryptocurrency projects, says Ellahie.

Chia's IPO strategy could be an expert way to do it. Cohen argues that arguing that forcing the industry to comply with conventional regulations would solve the problem of technical innovation. "If you start loosening them, do not get technologists involved with better things, get scam artists and steal things," he says.

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