The Impact of ASICs on PoW Chains Like Alephium

The Impact of ASICs on PoW Chains Like Alephium

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7 min read

Quick summary: This article explores the role of miners in Proof of Work (PoW) chains and the debate between ASIC-friendly and ASIC-resistant algorithms. It discusses how the introduction of ASICs can influence a blockchain's decentralization, security, and market performance. Highlighting examples like Bitcoin, Monero, Kaspa and Alephium, the article argues that being ASIC-friendly might not be detrimental, contrasting with the poor performance of some ASIC-resistant chains. The piece concludes with a clear and practical perspective on the effectiveness of these strategies in the broader context of blockchain technology and market dynamics.

Let's start by recognizing that miners plays an important role to any Proof of Work (PoW) chain, whether they're using ASICs or GPUs. Decentralization is a core idea in cryptocurrency, which is why we often hear "follow the miners." This holds true whether they’re mining with ASICs or GPUs. Diving deeper into this topic can lead you down a rabbit hole, touching on issues like centralization, 51% attacks, among others. But we will not make things too complicated here and just keep it straightforward.

Remember, miners set up their business on whatever chain is most profitable, no matter the technology or how much money is in that chain. That's because mining has different demands and requirements compared to building DApps, trading, or simply just investing in crypto.

With that said, let's dive into it.

POW Chains are Polarized Between Being ASIC-friendly and Being ASIC-resistant.

This has very long history that will lead you down into a rabbit hole full of nuanced arguments. But in my view, the debate is fundamentally based on the premise that for a Proof of Work (PoW) chain to attain widespread success, it must capture a substantial share of the mining market. Which is true, btw! But this is where the caveat is: To accomplish this, the chain would need to effectively communicate its commitment (or advertise per-se) to providing a secure environment for GPU miners as this would prevent bad actors getting unfair share” leading to a “more decentralized chain thru wider participation.

So, does this really give credibility to the assertion that all PoW chains MUST BE ASIC resistant?

I'd say, absolutely not. Truth is, even the biggest PoW chain in existence, is even using an ASIC friendly algorithm. The SHA-256 a.k.a., Bitcoin! I need to point out that even if the hash rates go up, the emission will remain the same. It's just that the share of the mining rewards will be diluted with the introduction of new powerful machines. This then leads to a healthy competition which eventually promotes crypto centric businesses to gain popularity and thrive. This is a better path rather than just taking away the fun from the desktop gamers by making their GPUs extremely expensive.

Some doomsday preppers might tell you it's all heading towards centralization. The easiest way to debunk that? Just look at Bitcoin. Seriously, some chains even come up with their own ways to measure how decentralized a network is, claim Bitcoin isn't, and then boast about being the most decentralized network using that same metric. I know, it sounds super sketchy, right?

A general rule of thumb, higher hashrates generally equate to a more secured chain.

You can fact check this claim here:

1. What Does Hashrate Mean and Why Does It Matter? - CoinDesk
2. The Miner's Guide to Hashrate
3. What Does Hashrate Mean and Why Does It Matter?

So how does the introduction of ASICS becomes so polarized to a point that people think it is bearish and other people thinks it is bullish?

How come some PoW chains crash at the introduction of ASICs and some chains pump?

The answer is straightforward. Regardless of the technical argument, it all boils down to guidance.

What is guidance?

It's an expectation that influences people's valuation.

Essentially, when the expectation (or the guidance per-se) is not met then this is a bearish scenario. When an expectation is met, this is neutral. The market is forward-looking has already priced in this guidance long ago and should not affect the market if met.. and when the expectation is exceeded, this normally leads to bullish sentiment.

In Alephium's case- right from the very start, Cheng Wang, the core founder of Alephium stated very clear, that the chain will use an ASIC-friendly algorithm. Blake3 is meant to be ASIC-friendly, but not meant to be ASIC-centric, paving a way for GPU miners to also thrive.

With that said. The introduction of ASICs on Alephium should be taken as Neutral scenario. The introduction of BITMAIN ASICs AND GOLDSHELL should be taken as bullish as it proves that there are many more bigger companies interested in Alephium. Also, let's not forget that PoLW will kick in as soon as we hit 1 Exahash (1M TH/s) and that's merely twice our current level.

(After careful computation, now that we are at 800 TH/s, it needed to 1,300x. Not twice)

The introduction of ASICs to networks previously marketed as ASIC-resistant should be seen as a negative development. This is because an algorithm can only maintain its ASIC-resistance only until an ASIC is developed. That's a fact. And again, these networks are compelled to modify their mining algorithm constantly to align with the expectations of their miners, leading to a detrimental cycle.

So, what even is Blake3?

BLAKE3 is a cryptographic hash function that is:

  • Much faster*than MD5, SHA-1, SHA-2, SHA-3, and BLAKE2.*

  • Secure*, unlike MD5 and SHA-1. And secure against length extension, unlike SHA-2.*

  • Highly parallelizable*across any number of threads and SIMD lanes, because it's a Merkle tree on the inside.*

  • Capable ofverified streamingand**incremental updates*, again because it's a Merkle tree.*

  • A**PRF*,* MAC*,* KDF*, and* XOF*, as well as a regular hash.*

  • One algorithm with no variants*, which is fast on x86-64 and also on smaller architectures.*

In other words, its the perfect algo for a sharded blockchain. Highlighting speed, security and parallelization. And the introduction of ASIC is a complement to the algo's features. It's a match made in heaven.

More details about blake3 here.

Still not convinced? Okay, let's look at-

The Flipside!

Let's consider networks that are promoted as ASIC-resistant.

  • Monero (XMR -28% YTD)

  • Ergo (ERG -13% YTD),

  • Haven Protocol (XHV -50% YTD)

  • Horizen (ZEN -0.44% YTD)

  • BEAM (BEAM -27% YTD)

  • Grin (GRIN -39% YTD)

  • Vertcoin (VTC +12% YTD)

  • Ravencoin (RVN +56% YTD)

It becomes evident that they are performing horrendously. Please, don't shoot the messenger, I'm only taking it from the data. The only exception here is Ravencoin, which is a fork of Bitcoin.

I'm not gonna rub salt to an already excruciatingly painful open wound by putting here the gains of ASIC-friendly chains like $BTC, $KAS and $ALPH.

TL;DR

  1. Miners play an important role in decentralization.

  2. The polarization between ASIC friendly/ASIC resistant has long history of nuanced arguments and is now debunked.

  3. It is the guidance that affects the trend, not the mere introduction of ASICs.

  4. BLAKE3 an ASIC-friendly algo to Alephium is a match made in heaven.

  5. Taking it from the data, ASIC-resistance is net negative.

Final Thoughts...

I may not possess extensive technical expertise, and if someone has the technical acumen to engage in a debate, presenting points that many cannot counter, it may be because the issue is that they are overcomplicating it.

I hold the conviction that the outcome will always justify the means, not in the sense of employing unethical methods to achieve goals, but rather in the sense that the results should be sufficiently practical to serve as a valid justification for whether a strategy has succeeded or failed.

If Bitcoin and other ASIC-friendly chains prove to be successful, then we can conclude that they are not practically harmful. This effectively debunks any concerns.

If the majority of these ASIC-resistant chains prove to be unsuccessful, then it can be concluded net detrimental. I said 'NET' because there are valid arguments that highlights its good features, however, in the broader context, their impact is negative.

Again, just a practical take.

That’s it for today! thank you for joining me.


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