📰NewsThe privacy focused Monero network successfully executed another of its semi-annual maintenance hardforks. The upgrade once again included a tweak to the mining algorithm aimed at removing specialized mining machines known as ASICs. As a result, the network hashrate dropped 80%, suggesting the majority of hashing power was coming from this hardware. This is despite the fact the Monero developers have promised to execute these algorithm changes, and have made good on the promise multiple times before. It implies the engineers behind these rigs have developed more flexible techniques which allow them to adapt fast enough to develop and deploy the hardware profitably, even knowing it will soon be made useless. Link.
Meanwhile, the Ethereum community is in the midst of a debate around a hashing algorithm change. The majority of Ethereum's hashrate is now believed to come from specialized hardware, despite the fact the current algorithm was designed to be resistant to ASIC development. The proposed replacement algorithm, known as ProgPOW, promises to remove ASICs from the network "permanently". One can't help but wonder, though, if this is a losing battle in the long term. Link.
Many in the Bitcoin community espouse the belief that specialized hardware actually increases the network's security. There is a lot of logic to this argument. Professionalized mining implies a would-be attacker must expend enormous resources producing or purchasing specialized hardware to gain 51% of the hashrate. A downside, though, is the inevitable centralization of mining that ASICs bring. Take, for example, this week's news that Bitmain is looking to deploy $80M worth of cutting edge hardware in China using hydroelectric power. Having large portions of the hashpower colocated -- under the auspicious of a single entity -- makes censorship or collusion significantly easier. Link.
Bitmain also announced this week that it is releasing a new Equihash miner, one which drastically improves on the hashing efficiency of existing machines. The Equihash algorithm is used most prominently on the Zcash network. Interestingly, the Zcash project is exploring a middle way between Bitcoin's embrace of ASICs and attempts to outrun them by networks like Monero. The so-called Harmony mining scheme is still being designed, but the high level idea is to allow more than one algorithm to mine the chain, such that existing ASICs would continue to function even as commodity hardware was made more viable. Link.
We're ten years into the grand experiment that is decentralized cryptocurrency networks, but it's clear we still don't fully understand the game theory behind Proof-of-Work mining. Can mining with specialized hardware reach a steady state equilibrium that is sufficiently decentralized? Or does it always beget an increasing concentration of hashpower into fewer and fewer hands? If it does, what can be done about it? Are continued hardforks a sustainable solution? Can a truly ASIC resistant algorithm ever be developed? These are all unanswered questions.
Don't mistake this, though, for a lack of respect for Proof-of-Work. In fact, it has functioned incredibly throughout Bitcoin's history. In many ways, using mining to time order a ledger in a decentralized way was the seminal achievement of Satoshi's invention. Despite the unanswered questions and tradeoffs -- including energy usage and lack of scalability -- it's the only system to date that really works. Until proven otherwise, Proof-of-Work mining is the gold standard.