In March, Bitmain announced Antminer X3, an ASIC miner for the CryptoNight algorithm, Monero, and just a couple of days ago it was Ethereum's turn, Antminer E3, an ASIC miner for the Ethash algorithm. Monero committed to ASIC resistance from the beginning hard forked yesterday to maintain status quo and the ETH community is pondering over different possibilities. Although ASICs are far more efficient and profitable than GPUs, like Monero, a few cryptocurrencies consider ASIC resistance being a major specification and are focused on maintaining it, all because of Bitmain's monopoly over ASIC miner manufacturing. Is it unethical if Bitmain uses its own hardware for private mining and thus centralizing mining sector and getting control over majority of network hashrate? It is/isn't because it's a free market and lack of competition. If I am not wrong Application Specific Integrated Circuit can be built for any algorithm, it's possible, depends on a coin's market cap, mining revenue/profitability, and cost of manufacturing ASICs. So basically ASIC development is inevitable, and crypto communities looking to maintain ASIC resistance have to do periodical hard forks, but is this strategy sustainable for long-term? Obviously, the long-term solution is ASIC commoditization.
“ASIC commoditization” refers to an imagined marketplace in the future, where there are many different manufacturers producing ASICs of comparable power and price point.But how long will it take for ASIC production to transform from monopoly to a truly competitive environment?
All cryptocurrency developers who build public proof-of-work blockchains have to face the same challenge: Bitmain, a China-based chipmaker with a monopoly over ASIC miner manufacturing. Bitmain’s dominance over hash power and enormous influence is dangerous for peer-to-peer networks. It makes protocols vulnerable to censorship and rule-changes dictated by a single central authority, upsetting the checks and balances between the various stakeholders.
And yet — there are benefits to having ASICs on your network. Specialized hardware is extremely efficient, and boast far more hash power, and thus security, per unit of electricity. They’re more reliable than home-built GPU miners, and allow miners to specialize, professionalize, and scale up. Additionally, ASICs are algorithm-specific, and could align miner incentives better with a specific project compared to GPUs, which are much more flexible.
However, ASIC critics believe that silicon manufacturing is an inherently unfair game, where larger chipmakers can use economies of scale to undercut and extinguish competitors. In theory, ASIC-resistant networks wouldn’t be necessary if their creators believed the ASIC manufacturing industry could ever be a level playing field.
1. Why create ASIC-resistant networks?
As a result of ASICs, the idea of an average person mining profitably with their CPU or GPU disappeared. Bitcoin mining is no longer a purely decentralized and egalitarian pursuit, as it requires millions of dollars of capital to participate in. Only large mining companies have the resources to create a competitive ASIC, and they control the supply of this hardware to consumers. There’s a much higher barrier to entry to creating and using ASICs compared to GPUs or CPUs. Mining concentration from ASICs has resulted in pools controlling more than 51% of the hashrate at times, and Bitmain producing a majority of Bitcoin mining chips.
2. How does ASIC resistance work?
It’s important to note “ASIC resistant” doesn’t mean that making dedicated hardware can’t be done. It simply means that the mining algorithm makes it less economical or profitable to produce ASIC chips for the algorithm — not that ASICs are impossible to create.
The core of the disagreement around ASIC resistance comes down to your view on the chip manufacturing industry. Proponents of ASIC-resistance projects also believe ASIC commoditization is impossible, and that specialized hardware will always be vulnerable to monopolization at every step of the process (development, production, distribution). Their argument is that economies of scale and cheaper electricity will allow a few corporations to perpetually dominate the mining process. ASICs will always be fundamentally incompatible with the idea of a fair and distributed mining process, so pursuing GPUs make more sense.
3. Are ASICs inevitable?
In a successful and growing cryptocurrency network, ASIC development is inevitable. Even if the ASIC is not exponentially more efficient than GPUs, it becomes profitable at a certain point to create specialized hardware and mine it.
4. The risks of hard-forking away from ASICs
The most simple answer is to change the Proof of Work algorithm via a Hard Fork. ASICs (Application Specific Integrated Circuits) will only work for specific algorithms, so small changes can render them useless.
Changing the proof of work algorithm can successfully fend off ASICs once or twice, but the long term sustainability of this strategy is questionable. This game of ‘cat and mouse’ requires community consensus and good execution to keep tweaking the algorithm. As open source protocols grow and become more widely used, this consensus will inevitably be harder to achieve. At some point, community stakeholders might realise these constant forks are being done in vain.
Apart from requiring community consensus that will get harder to achieve over time, hard forking every time ASICs are conceived has many risks:
1. The introduction of new bugs or exploits, whether accidental or malicious in nature.
2. Hard forks will scatter the hash power on the network.
3. GPU mining is also susceptible to economies of scale and domination by vertically integrated companies like Bitmain.
4. ASIC developers could build more flexible FPGA designs that can adjust to small algorithm tweaks.
5. Can ASIC Commoditization happen fairly?
We are now starting to see increased competition and decentralization of bitcoin mining. This is due to a couple of factors:
Increased geographical distribution. Due to government crackdown, some mining operations are moving from China to Iceland, Canada, the US, etc.
An end to China’s cheap electricity policy.Cheap electricity in China allowed miners based there to undercut everyone else and make it unsustainable for those in other countries. However, the government’s crackdown has made this practice less common.
Other chipmakers such as Intel and Samsung have entered the game. Bitmain’s huge margins have forced other companies to get involved in the foundry business.
It’s taken bitcoin around 5+ years to begin this process, and it will take many more years to finish.
With Bitcoin’s price increasing 1000% in 2017, it’s inevitable that competitors will enter the chipmaking and mining market. Many new mining operations have sprung up, and many more plan to enter the market over the next year.
Bitcoin mining is trending towards decentralization and resembling of a commodity product, but this is a long and slow process. Samsung and Intel could eventually compete with Bitmain, but it will take a while.
6. What can we conclude about the future of ASIC mining?
Changing the proof of work algorithm often comes with costs and is a never ending game of cat and mouse. Developers can obviate this game by focusing on the creation of a fair and sustainable environment for ASIC production and development.
Allowing ASICs to develop means mining could be centralized for a time being while the market is immature. However, with the large margins enjoyed by Bitmain, other operations won’t be able to resist competing.
There is no easy way forward, but embracing ASICs is probably the best route. ASIC commoditization is a very complicated issue, and determining whether it’s likely to happen will require more input from foundries, miners, and other stakeholders in the ecosystem.
https://tokeneconomy.co/is-the-war-against-asics-worth-fighting-b12c6a714bed
