TL;DR mining tends to centralise crypto, and it’s hard to stop it happening
A recent article from the Sia team gave a long and detailed overview of the current dynamics of crypto mining. You can read the whole thing at https://blog.sia.tech/the-state-of-cryptocurrency-mining-538004a37f9b.
It’s fairly dense and technical in places, so we’ll give you the brief version. If you’re up for the challenge, it’s well worth taking the time to check out the original because there are lots of good insights here.
The article paints a somewhat gloomy but realistic view of the mining world. We’ve recently had the situation of Monero hard-forking to prevent a new generation of ASICs from taking over control of their blockchain, changing their consensus to make it more resistant to specialised hardware. The writers – who have first-hand experience of designing and creating mining chips – have some thoughts on this move.
Firstly, hardware is far more flexible than most people realise. Mining involves highly specialised computational tasks, and it’s very hard to design such a task for which optimised hardware cannot be created. We’ve seen this over and over – Litecoin’s Scrypt mining was supposed to be more ASIC resistant, and Monero started out as a CPU-mined coin. But the reality is that if a CPU can do it, a custom-built ASIC will be able to do it faster.
Secondly, hard-forking might buy you a little time but you can produce new chips relatively quickly, especially if you take some shortcuts. If you’re iterating on existing chip designs, it can shave months off the time. There are other hacks that sacrificing performance – sometimes a lot of performance – but still result in something powerful enough to render a hard fork useless.
Thirdly, the chances are that most of the big ‘ASIC-resistant’ coins – those with significant block rewards – already have secret ASIC miners working on them and scooping up a large proportion of hashrate and new coins. The economics of mining are such that it is worthwhile big players designing and deploying custom ASICs and not telling anyone else, let along making them available to the wider market.
Fourthly, Bitmain plays dirty. The simple fact is that you can’t manufacture ASICs in China unless you’re Bitmain. Others have tried and mysteriously failed, or have been overtly hamstrung by the company. Bitmain already have significant advantages, and playing dirty tricks to lock out competitors is just another one of their strategies for staying on top.
Fifthly, and in summary: ‘The biggest takeaway from all of this is that mining is for big players. The more money you spend, the more of an advantage you have, and there’s not an easy way to change that equation.’ Mining is one of those time-old situations of the rich getting richer. If you have money, you can make money – and if you don’t, you’re facing an uphill struggle to compete.
Bottom line, mining is a tough business and it’s very, very hard to get ahead unless you’re already there.
Proof-of-stake don’t suffer from these flaws, though of course they’re not perfect. But Sia’s article and the questions it raises should be enough to make a lot of crypto enthusiasts realise that mining – the hallmark of ‘fair’ crypto – is anything but.
Read the full article at https://blog.sia.tech/the-state-of-cryptocurrency-mining-538004a37f9b
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Agreed, PoW is fundamentally broken in terms of providing de-centralised consensus, look at https://arewedecentralizedyet.com/ for a quick reference of how many entities control the top coins.
The problem is caused by the concept of pools. As soon as people begin pooling resources, someone is in charge of that pool, and that someone has a bigger influence than they would have on their own. I dont think ASIC really matters, OK its incrementally harder for individuals to be involved with ASIC, but I think that is a far smaller problem than pools.
Its alarming to see people building PoS pools now, these are completely un-needed and I believe are harmful to the coins that are included on them. Not mentioning names as I dont want to attract attention to them.
Unfortunately this is true, tried mining many coins - BTC, ETH, Monero, PKT... list goes on. It is just not profitable :(