ASICs Chips and the Centralization of Crypto Mining

May 31, 2018

Cryptocurrency mining is becoming a centralized business. Chinese cryptocurrency hardware manufacturer Bitmain accelerated this trend when the company introduced application specific integrated circuits (ASIC) to the market. ASICs are highly efficient integrated microchips, that have made CPUs obsolete in the context of cryptocurrencies. A GPU is an example of an ASICs chip. Crypto mining has become “clustered” with large crypto mining “farms” using ASICs to capture an increasingly significant portion of blockchains. Individual miners, operating with inferior technology, are finding it less rewarding and more challenging to compete with ASCIs-backed entities. Crypto software developers are beginning to recognize the threat of centralization posed by ASICs and are attempting to adapt.

Monero developers have made changes to their underlying algorithms, seeking to increase the difficulty of mining Monero using ASICs chips. Riccardo Spagnai, one of the lead developers at Monero, cited “centralization of manufacturers” and a “centralization of consumers” as catalysts for Monero’s efforts to limit the impact of ASICs.

Siacoin software engineers have also studied methods for halting the ASIC takeover. Results so far have been less than encouraging as, according to Siacoin lead developer David Vorick, ASIC manufacturers are adapting at a much faster rate than anti-ASIC developers can code. Voricks conceded that there was “no single ASIC resistance algorithm that our chip devs have looked at and said [ASIC’s] couldn't do".

Zooko Wilcox, founder and CEO of Zcash, shares a similar sentiment in wanting to limit the spread of ASICs, but is less inclined to take efforts to do so. Wilcox remarked that he is unwilling to interrupt the development cycle at his organization to implement anti-ASIC controls. Aside from his reluctance to devote resources to combating ASICs usage, Wilcox also stated that ASIC resistance is similar to manipulation. He compared the responsibility of deciding how miners operate to “holding a firehose of money”, and that he did not want to impact how the crypto mining market develops.

 While ASICs may be a challenging issue for the crypto mining market to navigate, it may be the hidden threats that pose the greatest risk. One of Vorick’s biggest concerns is that mining chip manufacturers are innovating their products secretly, and rather than offering this product to the public, these groups are mining themselves, and collecting the rewards.

The tremendous efficiency and wealth creation opportunity that are inherent to ASICs has increased the likelihood that ASICs will eventually dominate the crypto mining market. Software developers may attempt to retain control of the crypto mining market by actually partnering their projects with ASICs manufacturers. In exchange for providing access to their algorithms, crypto groups will require ASICs manufacturers to evenly distribute their hardware to that project’s community, helping to limit concerns of centralization among a small collective of mining groups.