In the digital currency mining world, the use of ASICs (Application Specific Integrated Circuits) remains a complicated issue. ASICs are chips designed to mine specific cryptocurrencies or even particular hashing algorithms. Essentially, they are targeted pieces of hardware that aim to beat out general GPUs by being more efficient (and therefore more lucrative) when it comes to the mining process.
ASICs are so powerful that once a coin-specific ASIC is released, it is usually unprofitable to mine without one, according to a report by Loki Network. This is not necessarily bad in and of itself. The problem for many cryptocurrency miners and investors has to do with the way that ASICs are created and distributed. Indeed, there are very few manufacturers of ASICs, meaning that the space is highly centralized. When a small number of companies have near-total control over distribution rights to hashing power for a cryptocurrency via unequaled ASIC technology, the process of mining itself becomes more centralized.
Concerns About Bitmain
Bitmain is one of the largest and most prominent ASIC manufacturers. Bitmain has repeatedly launched ASIC miners for coins that developers had claimed were "ASIC-resistant," meaning that the mining process could not be made more efficient through a specialized piece of hardware. According to Coin Insider, these specialized ASICs have routinely proven developers wrong, showing that they can, in fact, be more profitable. David Vorick, the lead developer of decentralized storage platform Sia, suggested that "you will always be able to create custom hardware that can outperform general purpose hardware," adding that everyone he has talked to "in favor of ASIC resistance has consistently and substantially underestimated the flexibility that hardware engineers have to design around specific problems."
The 51% Attack Issue
What does this mean for the cryptocurrency ecosystem? Simply that companies like Bitmain will undoubtedly be able to continue developing hardware that allows for more efficient and more profitable mining. Beyond outmaneuvering other miners, though, ASIC developers could easily end up controlling more than 50% of the hashing power on a blockchain when they have effectively blocked out non-ASIC miners. Once a group controls a majority of hashing power, that group can then abuse the decentralized nature of many cryptocurrencies, even rewriting transactions on a supposedly-immutable distributed ledger in a process known as a 51% attack. The threat that cryptocurrencies could very easily become centralized is quite real.
Centralization in mining can also open the door to other issues. Back in 2016, Bitmain was shown to have built secret capabilities into some of their ASIC miners which gave them the ability to control other bitcoin miners around the world, thereby crashing the hashrate.
Decentralization of ASIC Manufacturing?
One way the cryptocurrency world could address the growing threat of centralized mining is by decentralizing the manufacturing process for ASIC miners. A decentralized system would see dozens of companies creating ASIC miners, with competition driving prices down and availability up.
Another way to address the centralization of ASIC manufacturing might be to implement a new hashing algorithm that would effectively obliterate all existing ASIC miners. This would open the door to new manufacturers, leveling the playing field somewhat against established, heavily-resourced players already in the system.
Many cryptocurrency developers have attempted to fork their currencies in an attempt to limit the usefulness of particular ASICs. Time after time, though, this has proven futile, with ASICs catching up to algorithm changes quickly. Further, forking can introduce other problems into code and actually centralizes power with developers, which is not necessarily a desirable side effect.
For Vorick, the ideal solution involves admitting that hashrate is likely to be centralized among manufacturers of powerful ASICs. "Now that we know to expect a largely centralized hashrate," he says, "we can continue as developers and inventors to work on structures and schemes which are secure even when the hashrate is all pooled into a small number of places." He adds that "there are a large number of other incentives and mechanisms at play that keep monopoly manufacturers in line."