Crypto
Bybit Learn
Bybit Learn
Beginner
19 апр. 2022 г.

What Are ASIC-resistant Cryptocurrencies?

Cryptocurrencies have inherited a decentralized structure, designed to encourage the fair distribution of resources. However, as crypto gained popularity and potential rewards have gotten bigger, mining farms are slowly dominating the industry. Hence, farms with massive hashpower have threatened the foundation of crypto decentralization. For example, the sudden drop in Bitcoin network hash rate due to the power outage in one of Chinese mining hubs drove a violent Bitcoin crash.

This in turn has led to the creation of ASIC-resistant coins. Technically ASIC-resistant cryptocurrency can mine coins but it’s not financially feasible because the algorithm used by the protocol does not provide fair benefits over GPU mining. ASIC-resistant cryptocurrencies also translate to a more fairly distributed mining ability for participants with just regular PCs. Ultimately results in a fair distribution of mining resources — keeping the network decentralized.

What Are ASIC-Resistant Coins?

Application-specific integrated circuits, or ASICs, have specific applications in fields such as medicine, satellites, research, and more. In the world of crypto, ASIC-resistant is a term used for crypto coins that are less susceptible to mining by ASIC miners. Such coins have unique mining algorithms and protocols which make it less incentivized for miners to create ASICs to mine the specific coin, hence the term ASIC-resistant.

Ethereum is a classic example of a cryptocurrency built to deter ASIC mining. Even if someone tries to use an ASIC to mine the coin, it’s usually very inefficient in terms of time and cost to do so.

Before explaining why ASIC-resistant coins are the future of the decentralized crypto sphere, let's take a look at ASIC — the tool that poses a danger to decentralization.

What Is an ASIC?

ASICs miners are machines designed to mine crypto coins quickly. ASIC miners use ASICs to mine cryptos in large quantities, giving them an edge over others who use CPUs and GPUs. The immense computing power of ASIC potentially unveils in the crypto mining field.

The specialized software is developed by companies for crypto mining. Using such products, it’s possible to mine cryptos, including Bitcoin — because it’s not ASIC-resistant.

However, there is a downside to ASIC mining machines. First of all, these tools are very expensive, especially for the average miner. Secondly, the return-on-investment (ROI) is extremely volatile because changes in crypto algorithms can quickly render older ASIC designs completely unprofitable. In the end, many argue that the only beneficiaries of ASIC machines are the Chinese companies who profit from manufacturing and distributing such tools.

Preventive Mechanism of ASIC-Resistance Coins

An ASIC-resistant coin has a protocol and algorithm configured so that it’s difficult for an ASIC to take full advantage of mining capabilities.

In a way, an ASIC machine derives its power from multiple parallel and pipeline threads on a chip, which requires a lot of physical space on the chip itself. If the algorithm doesn't offer the space, the ASIC won’t be able to speed up the process, resulting in loss of efficiency. In certain cases, the result of mining an ASIC-resistant coin using ASIC is actually worse than mining it using a CPU.

Regardless of the type of algorithm, it's important to note that ASIC machines can be invented to mine any type of coin. Likewise, it’s also possible to prevent ASIC machines from mining, by making appropriate changes to the algorithm. In any case, if there are no ASIC mining machines for a particular coin, or if these machines aren’t effective, the coin is said to be ASIC-resistant.

How Does ASIC-Resistance Lead to Decentralization?

Developing ASIC-resistant coins is at the top of the agenda for crypto developers. This is the only way to keep cryptos decentralized. To understand the concept, let's first take a look at why ASICs pose a danger to decentralization.

Since the application of ASICs to crypto mining, there’s been a growing debate over the centralization of cryptocurrencies. As discussed, ASICs are uniquely designed circuits that do only one thing — and in the case of cryptocurrency, that one purpose is to mine cryptos, delivering enough computing power to ASIC miners to beat the GPUs and CPUs used by others.

The result is the monopolization of crypto mining — because only a few entities contribute significant hash power to the entire network. These large mining farms not only create a monopoly, but they take the underlying crypto network hostage, because the network relies on a few large mining farms to maintain the hash rate which keeps the network secure.

In an adverse scenario, the large mining farms using ASICs will contribute to the high percentage of hash rate for a particular network. If three or more large companies form a partnership, it’s possible to take control of the entire network, as these companies can generate enough hash rates to outmaneuver every other non-ASIC miner. The scenario could lead to a phenomenon known as the "51% attack," by which a few entities can centralize the blockchain.

Over the past few years, multiple cryptocurrencies have faced 51% attacks. Examples include Bitcoin SV, Verge and Ethereum Classic. It’s a huge problem because few groups can (theoretically) control the entire blockchain by rewriting parts of it or reversing transactions.

Clearly, we need to promote ASIC-resistant mining. The main reason to introduce ASIC-resistance technology is to give everyone a chance to mine crypto and contribute to the hash rate. By allowing ordinary people with ordinary machines to share rewards, ASIC-resistant mining ensures that the cryptosphere remains decentralized — and doesn’t end up being controlled by a powerful few. In essence, everyone can enjoy mining cryptos without the need to spend millions on ASICs.

Now that you have some idea of why ASIC-resistant coins make sense, here’s an overview of some of the most popular ASIC-resistant coins. Anyone new to coin mining can start by mining these coins, because the level playing field is dominated by the billion-dollar crypto mining ASIC companies.

List of AISC-resistant Coins

There are lots of popular coins that allow miners to reap large rewards using only traditional mining methods. Here’s a brief overview (each coin’s trading symbol in parentheses):

Ethereum (ETH, or Ether): The ETH coin uses the Keccak256 hashing algorithm, which is designed to resist hashes from ASIC machines. The Ethash algorithm is conducive to CPU and GPU miners as it only produces hashes for mining purposes. While a solo miner can also mine, miners often prefer to join a pool to get regular block rewards.

Monero (XMR): This is yet another blockchain network popular among miners. The unique CryptoNight protocol uses a RandomX hash function to create new coins. Due to the relative ease of mining, the blockchain doesn't require any special machine. Although ASICs are used to mine XMR, they’re not as efficient — which means that GPU mining remains the most productive method for mining Monero.

Safex Cash (SFX): Its mining algorithm, RandomSFX, was developed based on Monero's algorithm, RandomX (see above). A similar design features dynamic difficulty adjustment, which prefers CPU mining. Miners love mining SFX because there are lots of ways to in the Safex pool. You can either use a command-line interface on Ubuntu, or use software to mine. In addition, Safexcore Software is perfectly suited to solo miners.

Ravencoin (RVN): Recent changes in its algorithm mean that miners can use the power and computing capabilities of GPUs to mine coins. The new KAWPOW mining algorithm is user-friendly, and provides more opportunities for anyone interested in mining RVN.

Haven Protocol (XHV): This coin uses the proof-of-work mining algorithm, RandomX (see above). XHV is designed to be resistant to ASIC mining equipment, and anyone with a good computer can mine it. It’s also one of the most profitable currencies to mine, which is often two to three times more profitable than similar coins, provided that you can save on the electricity bill.

Ethereum Classic (ETC): ETC is a hard fork of the traditional Ethereum network. Upgrades to the Keccak256 algorithm in Thanos means that the coin has become resistant to ASIC machines, and you can even use 3GB GPUs for mining purposes.

Horizen (ZEN): This coin uses the ASIC-resistant Equihash algorithm, and it's one of the easiest coins to mine. Since its launch in 2017, Horizon’s development team has made several changes to make it more accessible to miners operating from home. Perhaps this is one of the reasons why it’s also considered to be the best among the various Equihash coins in terms of mining rewards.

Vertcoin (VTC): VTC is a very user-friendly mining coin. Its developers made sure that the Lyra2RE proof-of-work algorithm is only intended for home miners using CPUs and GPUs. VTC is ASIC-resistant, and is popular with beginners, as they can use the one-click miner to mine coins or join a pool for regular block rewards. It’s worth noting that the developers have plans to hard fork the network if an ASIC mining machine is developed to mine VTC.

Aeon (AEON): This coin is sometimes said to be a lighter version of Monero. The idea behind its creation is to offer a mobile-friendly alternative which is easier to mine and store since it uses fewer resources. The result is a CryptoNote protocol-based algorithm, which is very friendly toward crypto miners using light computing machines.

Of course, the above is not an exhaustive list. There are many additional ASIC-resistant coins out there, but this should give you some idea of where to start.

Advantages of ASIC-resistant Coins

From a miner's perspective, ASIC-resistant coins give them a fair chance to use home computers to mine cryptos without wasting thousands of dollars in ASIC hardware.

From the developer's perspective, ASIC-resistant technology is the only solution to keep the crypto sphere decentralized. Without ASIC machines, crypto will continue to serve its original purpose, which is to create a transparent financial environment without a monopoly.

From an environmental and technological perspective, ASIC mining machines consume millions of kWh of electricity per day and force developers to make undesirable changes to the blockchain. However, it is debatable as, without ASIC-resistance, ASIC mining is more efficient as compared to CPUs and GPUs where the hash rate per kWh is lower.

Limitations

Despite the growing debate over the use of ASICs, the ASIC industry continues to grow. As of today, there are three to four large players who rely solely on manufacturing ASICs. While coin developers continue to make changes preventing the use of such machines, ASIC companies play catch-up in this never-ending game of cat and mouse.

The Bottom Line

As long as there’s an incentive for miners to get rewards, people and companies will continue to develop technology that can give them an edge over others. Some experts even believe that there’s nothing wrong with using ASICs to mine crypto, as it merely represents a trend in the ever-evolving crypto sphere.

Despite the debate on the impact of ASICs, almost everyone agrees that ASICs are a threat to both an equitable hash rate distribution and to the decentralization of crypto. If ASICs remain in the picture, home and GPU miners will be left out of the game. Without any incentive for the ordinary miner, the purpose of decentralization is lost forever.