The Chia cryptocurrency took the European hard disk drive (HDD) market by surprise in April, making the number of nearline HDDs sold the highest ever, according to the latest data published by CONTEXT, the IT market intelligence company.
Manufacturers sold an extraordinary volume of HDDs sold to European distributors over the month, particularly in weeks 16 and 17, and data for the first two weeks of May confirms that demand is still high even though these months are, traditionally, those with the lowest sales.
The massive increase is driven by sales of nearline HDDs with this segment seeing its best-ever TAM in April. Nearline HDDs have the highest capacity and endurance of all drives on the market and so are perfect for the Chia farming process in which greater storage capacity matters more than processing power.
"Bitcoin and Ethereum currently use a mechanism called ‘proof of work’ to secure and validate transactions", said Gurvan Meyer, Business Analyst at CONTEXT. "In this process, computers all over the world essentially compete to be the first to complete calculations to confirm each transaction and the network rewards successful ‘miners’ with freshly minted coins. The more powerful the computer, the greater chance it will be able to claim the reward. This is why the availability of graphics cards and associated hardware has decreased – and their price increased – over the past few years."
Chia is using an alternative system called ‘proof of space’. Users set aside a dedicated amount of storage on their computers and the software allocates a unique number to each section of this space. When the network needs to validate a new transaction, it selects one of these unique numbers at random and the computer that segment belongs to then validates the transaction. So, rather than using computing power in a race, it’s using a lottery system. This is not only greener (in terms of passive power consumption) than the proof of work system but also more accessible. The barrier to entry is lower as almost anyone in the world might have unused storage space on their computer – perhaps even their phone – that could be used.
The rarely seen leap in demand has also affected segments other than nearline: customers have bought high numbers of NAS, surveillance and desktop HDDs. For the latter, demand for 8 TB disks has been especially high.
"The cryptocurrency market is currently bullish with the trend being one of increased value in the short, medium and long term", added Gurvan. "If the alternative validation model leads to this project (which currently has a market cap of ~500 million USD and is ranked as the 121st-largest crypto in the world by value) picking up traction, its value could explode – and more users on its network will mean higher demand for storage. Proof of space is a relatively new consensus mechanism but any number of new currencies could also choose to use it. Should the method gain popularity, the demand for storage could increase even further."
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