How to counter ASIC miners

The use of ASICs for mining allows you to get higher incomes in cryptocurrency for each ruble invested. But the initial cost of using them is also higher than when buying a PC (which often already exists) - with a cost of about $ 2000 (the specific price depends on the model), specialized chips are not available to everyone. On the other hand, ASICs are fast and people or organizations able to purchase a significant amount of them jeopardize the main value of cryptocurrencies - decentralization. The concentration of resources in one hand has led many cryptocurrencies such as Ethereum, Monero and ZCash to make their algorithms "ASIC-resistant". But will this stop the onslaught of the ASIC giants?

Windmills

Miners get fixed assets for the operation of “closing the block”, in which transactions are recorded. For most cryptocurrencies, the block is closed using the Proof-of-Work algorithm, which requires significant computing power. ASICs cope with this task faster than the central processors and video cards of ordinary computers, but you can choose block closing algorithms so that it was difficult to create a specialized cryptocurrency chip. So it turns out an “ASIC-stable” cryptocurrency. However, “hard” does not mean that it is impossible to outwit the algorithm, and the relative simplicity of manufacturing chips to order makes the appearance of specialized equipment inevitable: miners with the means will create such devices to have advantages in the production of digital coins and “beat off” the costs on a scale.

How do communities that want to maintain ASIC neutrality react? The easiest way out is to change the Proof-of-Work algorithm. This is done through a branch of the new currency (hardfork), the program code is changed for all participants and the laws by which Mining somewhat change. Personal computers were originally created as universal computing tools, they adapt to new algorithms. But in ASIC schemes, all the rules of hard protection and even small changes in coding algorithms when closing a block can make them useless. As a result, many cryptocurrencies are still mined mainly using video cards: Monero, Zcash, Ethereum, Vertcoin and others.

ASIC device manufacturers are trying to smoothly increase the number of devices in cryptocurrency networks in order to avoid detection by a sharp increase in the network's computing resources - this happened with the first ASICs that appeared on the Bitcoin network in 2013. Bitmain recently released the E3 ASIC to mine Ethereum, the second largest currency by market capitalization, which will go on sale in July 2018. Some stock analysts were quick to adjust their predictions for the share price of AMD and Nvidia (GPU makers), believing that the emergence of ASICs in Ethereum mining would lead to a decrease in demand for GPUs. At the same time, Bitmain is releasing these ASICs for sale, despite the fact that there are already assumptions about their uselessness - Ethereum should begin the transition to a different type of algorithm, Proof-of-Stakethat completely abolishes the existing mining process.

Unlike a simple change in the coding of blocks, which protects the cryptocurrency only from existing ASICs, the transition to a different algorithm (conditions for closing a block) Proof-of-Stake is a more radical solution. Playing cat-and-mouse with constant cryptocurrency hard forks requires community consensus and quality execution to keep the algorithm running. When using the Proof-of-Stake algorithm, on the contrary, it is not computing power that matters in mining, but the amount of cryptocurrency on the account. In other words, the probability of a participant forming the next block in the blockchain is proportional to the participant's funds in this cryptocurrency.

This approach eliminates the use of ASIC-schemes and other arms race. But it completely deprives the currency of decentralization, as it provides its beneficiaries with too strong leverage, and minority shareholders can increase their share only by purchasing significant amounts of digital money.

Unattainable ideal

Even in a world where there will be no ASIC, and mining will take place only on video cards, instant justice will not come. Moreover, it is the versatility and flexibility of the graphics adapter that presents the ability to mine various cryptocurrencies, unlike ASICs, that poses a particular threat. The "ASIC-resistant" Ethereum network, the second largest cryptocurrency in the world, has 2 million video cards. The two largest pools in Ethereum have about 500 GPUs each, and the next largest has about 000 GPUs. This means that the 250 largest Ethereum pools can take advantage of the blockchain technology to overcome the 000% power barrier that allows them to freely rewrite the contents of most non-top 3 cryptocurrencies registries without asking the rest of the participants. The only deterrent is the potential drop in the value of cryptocurrencies subjected to such attacks.

The versatility of video cards, which allows miners to easily switch from mining one cryptocurrency to another, is the key to decentralization - if large holders of computing power make it unprofitable to mine one cryptocurrency, users can quickly switch to another. But the problem of volatility is created: the quick arrival of users with new video cards lowers the income of each of the participants in the critical currency network. ASIC cannot be switched to another currency, which means that the scope for speculation is seriously reduced and maintains a relatively stable exchange rate.

The tightening of China's policy on energy consumption by the mining industry will help expand the geography of mining, and ASIC mining in particular. Due to government pressure, some major mining operators are moving from China to Iceland, Canada, Russia and other countries. Among other things, a number of experts predict that in the near future the large corporations Intel and Samsung may compete with the Bitmain, which has lost its reputation, which will improve the situation with the specialized chips market. If this happens, the era of using video cards in mining will end as it once did with central processing units. At the same time, there remains a combination of approaches: the community of the anonymous cryptocurrency ZCash is considering the option of combining both approaches, where part of the emission will be given to ASICs to be torn apart, and the other - to miners on video adapters. Will this approach take root or the current situation will require a more technological solution - we will find out in the near future.

The current split in the cryptocurrency community resembles the princely feuds of the dark Middle Ages. A powerful technological breakthrough in the development of the blockchain was replaced by stagnation and a split in the community - into followers of individual currencies or approaches to their extraction, and within the currencies themselves with regard to the strategy for their further development. As in the IX-XI centuries, the split does not bode well - the liquidity of popular currencies decreases as a result of their separation, and a chain of endless hard forks with a change in the algorithms used increases the likelihood of errors, not to mention the loss of confidence in individual currencies and the teams behind them development.

I believe that we are witnessing a turning point that will largely determine the future of the entire industry, both cryptocurrency mining and the currencies themselves, which will stand in the ongoing confrontation.

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