Explained: ASIC resistance and why it is good for small-scale miners


ASIC stands for ‘application-specific integrated circuit’. As the name suggests, it is a microchip designed for one specific purpose. In the case of cryptocurrency, this purpose is mining.

To mine any cryptocurrency, computers need to solve mathematical puzzles to reach a common solution. This process is known as hashing. It is a difficult and time-consuming process as the puzzles are very complex and get harder with time. This is where ASICs come in.

They are specially optimised to carry out multiple hashing functions per second. They are also extremely energy-efficient, considering how much processing power is required to solve these puzzles. While the mining process itself entails high power consumption, carrying out the same process with household computing equipment would require even more energy and time.

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The downside of ASICs

ASICs make light work of the mining process, and that’s a good thing, right? Well, not really. These microchips are far from consumer-grade. They are specialised chips that are expensive to acquire and run. Moreover, you need more than one ASIC machine to run a profitable mining operation.

That’s why, when we look at Bitcoin, where mining is carried out strictly by ASICs, massive mining farms account for a large portion of the network’s total hashing power. This creates a concentration of mining power within the hands of a few large companies. Thereby centralising a process that is meant to be decentralised.

The solution? ASIC-resistant coins

These are cryptocurrencies that employ ASIC-resistant algorithms. Their ecosystems are designed so that it is not profitable to carry out the mining processes using ASIC machines. These coins are predominantly mined using standard graphic processing units (GPUs) and central processing units (CPUs). In fact, using an ASIC rig to mine these coins could result in losses.

Examples of ASIC-resistant coins

There are several ASIC-resistant coins in the market, including Ethereum, Monero, Ravencoin, Vertcoin, etc. Ethereum favours GPUs for its mining process and rejects hashes from ASIC rigs. Monero is another ASIC-resistant cryptocurrency. Its algorithm allows you to use a GPU or CPU to enter the mining process. Ravencoin is a forked version of Bitcoin introduced purely to make mining more accessible through an ASIC-resistant algorithm.

Benefits of using ASIC-resistant algorithms

Firstly, ASIC-resistant coins reduce the initial cost barrier to enter the mining process. The starting price of an Antminer, one of the most popular ASICs for Bitcoin mining, is around $6,000. The more expensive ones can cost up to $11,600. On the other hand, a good GPU would set you back a few hundred dollars.

Besides the mining angle, ASIC-resistant algorithms also benefit the blockchain. To begin with, they help keep the network decentralised by allowing the community to participate in the mining process. This ensures that miners are spread across the world rather than concentrated in a region or country. This can be helpful in case local laws suddenly ban mining, as China did in 2021.

ASIC-resistant algorithms also protect the network against 51% attacks where one large entity comes to control a significant portion of the network’s processing power.

This happened to the Bitcoin Gold network in 2018 when a few miners controlled more than 50 percent of the blockchain processing power. They were able to manipulate transaction records and siphon over $18 million from the network.

However, it is important to note that ASIC-resistant algorithms are not full proof. This is because ASICs can be developed for any mining process. Therefore, companies can develop an ASIC chip for a particular coin. To thwart these new ASICs, the blockchain would need to introduce a protocol upgrade, as Monero did in 2019. That’s why it’s called ASIC resistance and not ASIC-proof.

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