Asic Resistance And Why It Is Good For Small-Scale Miners

ASIC is an abbreviation for “application-specific integrated circuit”. As the name implies, it is a microchip designed for one particular purpose. For cryptocurrencies, this purpose is mining.

To mine cryptocurrencies, computers need to solve math puzzles to reach common solutions. This process is called a hash. This is a difficult and time-consuming process, as puzzles are very complex and difficult over time. This is where ASICs come in.

These are specially optimized to execute multiple hash functions per second. It is also very energy efficient considering the processing power required to solve these puzzles. The mining process itself is expensive, but it takes more energy and time to run the same process on a home computing device.

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Disadvantages of ASIC

ASICs handle the mining process easily, which is good, isn't it? Well, it's not. These microchips are far from consumer. These are special chips that are expensive to acquire and execute. In addition, multiple ASIC machines are required to perform profitable mining operations.

So if you look at Bitcoin, which is strictly mined by ASICs, large mining farms make up the majority of the total hash power of the network. This puts mining power in the hands of a few large companies. This allows you to centralize processes aimed at decentralization.

solution? ASIC resistant coin

These are cryptocurrencies that employ ASIC-resistant algorithms. Their ecosystem is designed so that it is not beneficial to perform the mining process using ASIC machines. These coins are mainly mined using standard graphics processing units (GPUs) and central processing units (CPUs). In fact, mining these coins using an ASIC rig can result in losses.

Example of ASIC resistant coin

There are several ASIC resistant coins on the market, including Ethereum, Monero, Ravencoin, Vertcoin and more. Ethereum prioritizes the GPU over the mining process and rejects hashes from ASIC rigs. Monero is another ASIC-resistant cryptocurrency. The algorithm allows you to enter the mining process using the GPU or CPU. Ravencoin is a fork version of Bitcoin that was introduced purely to make mining more accessible via ASIC resistant algorithms.

Benefits of using an ASIC tolerant algorithm

First, ASIC-resistant coins reduce the initial cost barrier to entering the mining process. Antminer, one of the most popular ASICs in Bitcoin mining, starts at around $ 6,000. More expensive ones can cost up to $ 11,600. On the other hand, a good GPU can save you hundreds of dollars.

In addition to mining angles, ASIC-resistant algorithms are also useful for blockchain. First, keep your network decentralized by allowing the community to participate in the mining process. This allows miners to be dispersed around the world rather than being concentrated in a region or country. This is useful if local law suddenly bans mining, as China did in 2021.

ASIC-resistant algorithms protect the network from 51% of attacks that allow one large entity to control a significant portion of the network's processing power.

This happened in the Bitcoin Gold network in 2018 when several miners controlled more than 50% of the blockchain's processing power. They were able to manipulate transaction records and soak over $ 18 million from the network.

However, it is important to note that ASIC-resistant algorithms are not complete evidence. This is because ASICs can be developed for any mining process. Therefore, companies can develop ASIC chips for specific coins. To thwart these new ASICs, we need to introduce protocol upgrades on the blockchain, as Monero did in 2019. Therefore, it is called ASIC resistant, not ASIC resistant.