Changing the algorithm of many major cryptocurrencies is on the menu! As concerns about miner centralization begin to intensify, a few cryptocurrency communities are considering a change in the underlying algorithm to kill ASICs, specialized hardware machines that improve the efficiency of mining. Monero will conduct a Proof of Work (PoW) change in the upcoming April 6 release, Lithium Luna, while some in the Bitcoin community are also debating a similar change.The ASIC Debate: Costs and Benefits
What is an ASIC? It stands for Application Specific Integrated Circuit and allows for greater efficiency in the mining of cryptocurrencies. ASICs followed CPUs, GPUs, and FPGAs, each used successively to mine bitcoin. But as the cryptocurrency ecosystem matures, more and more altcoins are being opened up to ASIC mining. Namely, Decred, Monero, and Siacoin are three prominent examples.The Costs of ASICs
Proponents of ASIC-resistant schemes like Vertcoin or Cryptonite as used by Monero argue that ASIC’s contribute to centralization. The specialized units are relatively more expensive than GPUs and are less widely available, meaning that the mining power is consolidated into the hands of the few. By raising the entry barriers to mining, ASICs are argued to reduce competition and make the mining sector more like an oligopoly or monopoly whereas those mining ecosystems that are ASIC-resistant are presumed to be closer to a perfectly competitive market.
One of the principles underlying bitcoin was “one CPU, one vote,” referring to how anyone with a computer could join and secure the network. But now if you try to mine with your computer, your contribution will be negligible, since there are now mining farms that have taken advantage of economies of scale. But as a result of mining firms taking advantage of economies of scale, a large proportion of bitcoin’s hashrate is distributed across very few places, making it easy for a government o...