In his blog, American cryptocurrency company Coinbase stated his view on the industry of mining and cryptocurrency security, working on the consensus algorithm Proof-of-Work.
All cryptocurrencies record as owners in the network. In order for a cryptocurrency could be used, there must be a way to update this state of ownership. Most existing cryptocurrencies condition of possession is determined by the history of all transactions that ever happened in the network. This history is stored by the network nodes in the data structure, which is known as the blockchain. To update the status of the owner, there must be a way to add recent transactions to the blockchain.
Different cryptocurrencies for different complement their blackany. In crypto-currencies that use proof of execution of work (Proof-of-Work, PoW), the blockchain is complemented by a process known as mining. Miners unite recently announced transaction in the data structures (blocks) that are added to the blockchain.
Miner tries to add a block, solving unique to the proposed unit task. If miner can find a solution, he would declare the block and its solution to the rest of the network. The rest of the network recognizes the validity of the decision and will consider the proposed unit as the most recent addition to the blockchain. Please note that the miner does not need permission to create a block that allows miners to enter and exit the network at will.
To determine the transaction history in situations where miners can create a few valid stories of a transaction (that is, different valid blocks or even a chain of valid blocks), PoW-defines cryptocurrency blockchain with the greatest job as the canonical transaction history.
This is a consensus rule introduces a fundamental property of PoW-cryptocurrencies: any subject who can find more solutions to perform work in relation to the rest of the network, can unilaterally create a valid transaction history, which the rest of the network will take as a canonical transaction history (however, this does not mean that this entity has unlimited power over the network).
Miners are interested in long-term use of their equipment. Long service life of equipment provides a better chance for ROI of miners. The equipment owners are losing their investment if the use of a particular type of equipment loses its meaning. This can happen if the hashing algorithm was changed to “ASIC-resistant”.
However, as practice shows, the coins, which have ASIC-resistant algorithms, are very susceptible to attack 51%. Well-known examples of ASIC-resistant coins, which were successfully carried out attack 51%, include BTG, VTC and XVG. To date, there is not a single case where the coin which dominates a particular type of equipment would be subjected to attack 51%.
The only way a significant reduction of risk of attack 51% for PoW coins is the use of specialized equipment for the mining asset. The coins produced on widely available hardware products (CPU and GPU) is missing this important safety feature because of the large reserves of computing power that exist outside of the coin.
In addition, no algorithm is ASIC-resistant. For computer problems of hardware, specially designed to solve this particular problem, there will always be more effective than hardware General purpose. In addition to the advantages of recording the logic of using the equipment directly to the circuit, special equipment is not burdened with other demands for common equipment.
The algorithms that were reported as ASIC-resistant, and are unable to prevent the development of ASIC. Well-known examples include scrypt (LTC), equihash (ZEC, BTG), ethhash (ETH) and cryptonite (XMR).
In addition to this ASIC-resistant algorithms raise the barrier to entry into the market for equipment for mining. Introduction ASIC-resistant algorithms complicate the creation of an efficient ASIC and the natural result of this is that to create an efficient ASIC required more investment and expertise. Thus, ASIC-resistance just raises the barrier for entry into the ASIC market. This leads to greater centralization of production hardware for mining — the situation which confront the ASIC-resistant algorithms!
Instead, the goal should be to choose an algorithm which is simple and cheap to manufacture ASIC miners. This leads to the fact that ASIC miners will become a widely used product. The market will be able to go to other manufacturers that, most likely, will lead to the creation of a network with more decentralized mining.
When developers choose ASIC-resistant algorithm, they provide competitive support for large equipment manufacturers, which ultimately will create ASIC for a new algorithm.
So, the team Monero in its strategy implicitly recognized the fact that the algorithms cannot be protected from ASIC. They realized that the attempt to develop ASIC-resistant algorithm to anything will not lead. Instead, they decided to change the algorithm every 6 months, so it’s not stimulated the creation of specialized equipment.
This strategy underestimates the ability of talented hardware engineers to quickly incorporate new functionality in the equipment. Highly skilled developer of chips will almost certainly can quickly turn any algorithm in ASIC. This will force a small team of developers of Monero to play cat and mouse with the mining companies and to hide their plans to change the algorithms (with huge financial incentive for any member of this team to break this secrecy). The criticality of the decisions of this team are not good characteristics of a decentralized cryptocurrency and creates a more serious risk of centralization than the miners.
The limitations of this strategy are already apparent, as it is expected that ASIC will be successfully developed and launched XMR for at least 3 different versions of the algorithms.
The overall goal of the developers of ASIC-resistant algorithms is usually something like: “to Make the network is not controlled by a few people.”
In practice, however, this position is not critical, and actions undertaken for the decentralization of mining, do more harm than good. Ironically, the coins, which have ASIC-resistant algorithms that provide greater centralization and control of miners.
The only achievement ASIC-resistant algorithms is to increase the level of producers in developed by efficient miners. This, in turn, means that ASIC miners will eventually be to get any PoW-coin, which has a significant value.
Cryptocurrency does not create a fully egalitarian system. Along with this, cryptocurrency has achieved significant improvement compared with the traditional manual and opaque financial system.
The growth of the market of digital assets, the participants should ask themselves whether industry is protected by fans, using older laptops at home, or it will be a large-scale phenomenon, where significant resources are invested. Any professional industry uses specialized equipment — it is naive to think that mining is or should be different.
Source — CoinSpot