ASIC stands for application specific integrated circuit. It’s an integrated circuit (IC) that is customized to be used for a particular purpose rather than for general purpose uses. ASIC miners were introduced in early July 2012 and presented the next step in the development of Bitcoin mining hardware. They were fourth generation miners after CPUs, GPUs, and FPGAs and easily outperformed the devices above when it came to mining in terms of speed and efficiency.
ASICs are usually custom built for a single hash algorithm and for one to mine different coins they will need different ASICs for each coin they want to mine. Currently, there are a number of companies that design ASIC miners including Canaan and Bitmain.
Since these devices are highly customized and niche specific, ASIC machines don’t come cheap, and a single device can cost you around $3,000. What really draws cryptocurrency miners to ASIC machinery is the fact that they provide higher profitability than CPUs and GPUs since they are faster and more energy efficient.
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Advantages of ASIC
Some of the benefits of ASIC miners include:
- They are designed to have the highest hash rate for any crypto coin they are built to mine. So for a machine like Antiminer L3+ that is intended to mine coins that are based on the Scrypt mining algorithm, it has the power to outperform any CPU or GPU miners that are also trying to mine the same algorithm.
- ASIC miners are designed to use less electricity when compared to CPU and GPU miners. When buying ASIC mining hardware, it’s advisable to check the Hash per Watt rate (H/W) as this is used to measure the efficiency of the device.
- Since ASIC machines are built and designed by experts, they have higher lifespans than do it yourself GPU mining rigs, and they usually occupy smaller floor space.
Disadvantages of ASIC Miners
- All ASIC miner devices are quite pricey, and they require a high initial capital outlay to buy.
- They have a shorter profitable life span since as soon as a new version enters the market, the older versions become obsolete.
- They are less versatile compared to GPU’s since they are designed to mine a specific algorithm.
- Unlike a GPU rig, an ASIC miner can’t be upgraded, and it’s forever limited to its original specifications.
- They also lack any other use value like GPUs which can be used in gaming and AI.
Why ASIC Miners are not Good for the Crypto Space
There is no doubting that ASICs usually offer a significant advantage over CPUs and graphics cards (GPUs) as we have discussed above. However, the main problem with them is that currently there are a few large companies that are participating in the manufacturing of these devices.
This leads to a centralized manufacturing process that sees around one or two companies in possession of nearly all the distribution rights to the hashing power of a crypto coin hence this leads to the creation of a quasi-centralized mining system.
Additionally, these manufacturers can build a secret back door access to these devices that allows them to turn off a large portion off these machines and crash their hashrate as it was discovered with Bitmain back in 2016.
The cryptocurrency community does not object that ASIC miners offer a significant performance increase over GPUs, but the problem is their manufacturing process is very centralized. This has led many to ask the question if the manufacture of ASICs can be decentralized?
Many would also like to see how decentralized manufacture and distribution of ASICs would look like. Which can lead to a point where people can buy an ASIC machine from their local computer hardware store like it’s possible with GPUs. Ideally, crypto enthusiasts wouldn’t mind seeing around 20 to 30 companies competing to offer the cheapest and the most available hardware that is built to mine different crypto coins specifically.
In the past, many assumed that Bitcoin mining hardware would diversify in the above-described manner. However, ASIC miners for Bitcoin have now been around for about seven years, and it’s becoming clear that the market is becoming more centralized and not less with the likes of Bitmain dominating.
Solution To ASIC Miners
Some crypto enthusiasts have proposed an idea that seeks to level the playing field with a hashing algorithm like SHA-3 which is easier to implement on mining hardware than the SHA-256, and it’s likely to force all companies developing ASIC miners to start from the scratch. However, it’s still unclear if this can lead to the decentralization of the market or if the companies with the most money would still manage to come out on top.
So for now, whenever a manufacturer releases an ASIC, the team in charge of developing the cryptocurrency has to decide if they can fork the coin and deal with issues that coming with the exercise or they can accept that only a few manufacturers like 2 or 3 that will be controlling the distribution of the hashing power.
One cryptocurrency that decided to go the forking way is Monero. Its development team decided that it would slightly change the coin’s hashing algorithm every 6 months. Since ASICs are built to represent physical implementations of the hashing algorithm any slight change to the hashing algorithm means manufacturers have to build an entirely new machine. Usually, this can cost the company millions of dollars in research and development, and it’s enough to deter ASIC manufactures.
However, there are dangers to forking every 6 months as every hard fork that leads to the change of the hashing algorithm presents a loophole that can introduce critical bugs into the code. Also, developers, in this case, have more power as they get to decide if an algorithm is included or not. And finally, developers are prone to bribery, and infiltration attempts by ASIC makers who can use the information gained to future proof their miners from upcoming forks.
All in all, other than forking there are other models that are being explored which promise to be ASIC resistant hashing algorithms like Cuckoo Cycle, Argon 2 and RandProg.