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Tron Now Owns a Stake In BitTorrent Founder's New Crypto Project

When BitTorrent sold to the founder of controversial crypto startup Tron, it wasn’t just one of web 2.0’s earliest and most prestigious startups that changed hands.

It turns out, the peer-to-peer sharing company now owned by Tron founder Justin Sun also took a small stake in Chia Network, a soon-to-be-launched cryptocurrency protocol helmed by BitTorrent co-founder Bram Cohen, a fact that was not been previously disclosed by either firm.

According to documents obtained by CoinDesk, Sun submitted his winning acquisition offer to the BitTorrent Board on February 14. The next day, the board unanimously approved an agreement with Cohen granting a “full release” of some of its intellectual property (IP) in exchange for the right to make a $50,000 investment in the company under a Simple Agreement for Future Equity (SAFE).

As for what IP might have changed hands, and that might be helping to power the Chia network, both companies are now staying silent on the matter.

A spokesperson for Chia Network told CoinDesk:

“There has been no license or assignment of rights from BitTorrent to Bram [Cohen] or Chia. All software and related intellectual property rights used internally or distributed by Chia was either developed by Chia employees or contractors, licensed from third parties or was available in the public domain. Chia has committed to open source.”

Sources with knowledge of the deal said the two companies further entered into an agreement of “mutual releases and non-disparagement,” so that neither party would bring suit against the other due to events that happened prior to the investment.

All in all, it’s the latest information on Sun’s surprise acquisition of BitTorrent, first reported by Variety in June, and which subsequently prompted no shortage of dialogue and confusion in the industry.

In July, BitTorrent announced it would operate from Tron’s San Francisco offices.

Cohen’s role

While Cohen remained on BitTorrent’s board, he left to start Chia in late 2017.

According to the merger documents, Cohen still owned 31 percent of BitTorrent’s common stock at the time of the acquisition. Common stock holders received $29,343,986 of the $119 million sale. Each share of common stock was worth a base price per share (with various conditions) of roughly $0.81.

By the time of the sale, Cohen’s attention was primarily directed at the new venture.

Chia Network is a more eco-friendly way of securing a public blockchain, as CoinDesk previously reported in September. Miners on the network prove that a certain amount of disk space is available to the network. Validators on the network turn over unused disk space for Chia’s use, according to its FAQ.

In March, it announced a $3.395 million funding round led by Naval Ravikant, which also included Andreessen Horowitz, True Ventures, MetaStable, Greylock Partners, Danhua Capital and DCM.

DCM was also the leading shareholder in BitTorrent.

At that time, the company said it would do what’s known as a “mini-IPO” under the Security and Exchange Commission’s Reg A+. The round was promised in the second quarter, but it has not yet been publicly announced. Many of BitTorrent’s patentable inventions list Cohen as the inventor.

Google Patents lists six patents with Cohen as the inventor, the oldest being “End-system dynamic rate limiting of background traffic.” All of the patents he’s credited with still show up as assigned to BitTorrent.

Internal BitTorrent documents reveal that early on Sun wanted Cohen and other early staff to return, but removed that requirement as a stipulation of the deal.

BitTorrent did not reply to a request for comment by press time.

BitTorrent photo via CoinDesk archives 

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Chia To Change Crypto Mining

The founder of BitTorrent and a few of Bitcoin’s community development team are working together on a new altcoin that could revolutionize the way transactions are mined. The major problem facing Bitcoin today is the excessive power and hardware requirements for mining. The initial concept was to give people the freedom from financial institutions, central banks and governments however the decentralized nature of crypto currencies is now under scrutiny as big business still wield considerable influence over it.

The high cost of mining has put it beyond the reach of average people; and the majority of it is controlled by Chinese conglomerates. The market for mining hardware and mining itself has been cornered by Chinese companies such as Bitmain, the supplier of ASICS chips used in mining rigs. An estimated 80% of all Bitcoin mining is carried out in mega-factories in China, where there is a tight grip on the monopoly.

Aside from this centralization of a decentralized entity power consumption is another huge problem Bitcoin faces. Recent reports indicate that a single Bitcoin transaction uses the same amount of electricity as the average American household does in a week. There are roughly 278,000 Bitcoin transactions per day which now equates to 0.12% of the world’s electricity consumption. In today’s eco-conscious world we are constantly seeking ways to reduce our carbon footprint, not add to it.

BitTorrent founder Bram Cohen thinks he has the answer and it lies in his new token, Chia Network. At the moment most crypto currencies use a proof of work concept which involves hash calculations and power hungry mining machines. The fundamental change with this new token from the San Francisco based company is that it will be based on an entirely different process called ‘proof of space’ or ‘proof of time’.

According to Cohen who told reporters “The idea is to make a better Bitcoin, to fix the centralization problems” referring to China’s dominance in Bitcoin mining.  “We’re calling it farming instead of mining because it’s greener. You don’t need lots of power in order to farm with proof of space.” Expensive mining rigs and high power consumption is not required with farming, it can leverage the unutilized storage capacity that you have on your system, in a way where your actual file system doesn’t even notice that it’s going on. The rewards are directly proportional to the resources you put it.

The token is slated for launch in 2018 but no further specifics were provided on the company website. Bringing mining or ‘farming’ back to the masses could be the only way to be truly decentralized.