These Miners Might Be Dangerous, But Avoiding Them Is Complicated
The spectre of re-centralisation is haunting crypto. Its cause: the expansion of application-specific integrated circuit (ASIC) chips, which can mine bitcoin more efficiently than GPUs (graphics processing units) and CPUs (central processing units), but which are so expensive only the biggest companies can run them.
In the past couple of months, Bitmain – the world’s largest producer of ASIC mining units – expanded beyond bitcoin and announced ASIC products designed specifically for the Ethereum and Monero blockchains. This has now sparked fears throughout crypto development communities that the consolidation seen in bitcoin mining may spread elsewhere, undermining the decentralised, egalitarian ethos on which bitcoin was founded.
However, these communities have come up with several strategies to avoid the dominance of ASIC miners, while certain experts contend that the cost and centralisation of crypto mining is an effective way to ensure blockchain security.
51% by the end of October?
Launched in 2013 and headquartered in Beijing, Bitmain not only produces the majority of ASIC units used by mining facilities, but it also commands – as of writing – 42% of all processing power being used to mine bitcoin (via its mining pools, BTC.com and AntPool).
As recently as August 2017, it was responsible for only 28.9% of all processing power. Assuming the same linear progression over the coming months, it will command 51% by the end of October (55.1% by January).
This benchmark will have massive symbolic importance, since blockchain theory has always suggested that possession of at least 51% of processing power could enable an actor (e.g. Bitmain) to fork the bitcoin blockchain at will and double-spend their own bitcoins.
Incentive misalignment
There are other hypothetical risks that come with mining centralisation. Censorship is one of them, and as pointed out to Cryptonews.com by blockchain analyst Tony Arcieri, so is the strong possibility that developments to bitcoin/crypto protocols get skewed in favour of miners.
“The biggest problem,” he explains, “is that the incentives of miners are generally not aligned with either the incentives of system users or Bitcoin developers. We saw this come to a head with the so called “block size debate”, where miners were actively blocking a protocol upgrade/soft-fork (SegWit) because it prevented an ASIC-related mining optimization (ASICboost). This misalignment of incentives sows controversy and makes protocol upgrades (in my opinion, needlessly) much more difficult.”
Still, Arcieri adds that a growing number of cryptocurrencies are finding ways around ASICs. “Almost all next-generation proof-of-work based systems do not use a simple circuit like the SHA-256 algorithm used by Bitcoin, but instead use deliberately complex algorithms which are difficult to implement with ASICs. An example of this is the Equihash algorithm used by Zcash.”
Another example is Monero, which recently adopted the policy of regularly altering its algorithm so as to make life difficult for ASIC-based hardware.
Conversely, Ethereum – which is facing the prospect of Bitmain’s upcoming Antminer E3 chip – isn’t planning regular anti-ASIC updates to its algorithm. However, it is planning an eventual shift to a proof-of-stake algorithm, which works by node operators committing money in order to confirm the addition of a new block. This will effectively abolish mining, thereby making players such as Bitmain irrelevant.
Resistance is futile?
Despite these moves, there are some figures in the crypto world who believe that the anti-ASIC movement is either futile or misguided.
One such figure goes by the pseudonym of PZ, one of the founders of the Monero Classic cryptocurrency, which was born precisely when Monero forked to resist the approach of ASIC units. Writing last month on the occasion of its birth, he said, “We should be reminded of the fact that emergence of professional mining machines will greatly improve network security.”
The thinking behind this assertion is that, because it would cost so much money to reach the 51% threshold necessary for a ’51 attack’, any would-be attacker is thereby put off before they’ve even begun, since they’d risk squandering their massive investment by doing something that would destroy confidence in the bitcoin blockchain.
Similarly, other commentators suggest that, even when algorithms are given anti-ASIC tweaks, manufacturers of ASIC hardware will always find ways around said tweaks. As Zcash founder Bryce “Zooko” Wilcox said in a recent post, “even if ASIC-resistance is possible this year and next year, it will almost certainly become impossible given enough scale and enough years.”
