DASH (formerly DarkCoin) fanboys will deny the issue with this, but it’s partly why they re-branded, with the other reason being they are no longer pretending to be a privacy coin (dark = private). You can see these scams are multi-faceted, in that they use a “CPU only” algorithm as a one of many selling points to get people interested, but they then go and pre/insta-mine millions of coins without having to worry about competition before releasing it to everyone else. BitcoinTalk is littered with sketchy coin launches just like this, so it makes sense to see one of them become a “major” altcoin. It doesn’t make it any more legitimate than the others, but most people just don’t know better.

When Will It End?

Cryptocurrencies are not disappearing any time soon, and it’s likely there will always be minority chains that try to achieve the spotlight. While I can’t predict when the trend will subside, the amount of coins in existence doubled over the last year alone. A good portion of them are ICOs, but (within the context of this article) more notably is the introduction of new blockchain security methods. The most known of the bunch is Proof-of-Stake, but then there’s Delegated-PoS, Proof-of-Storage, Proof-of-Authority, Proof-of-Work w/Masternodes, Proof-of-Endorsement (??), and Directed Acyclic Graphs …

The list keeps growing, and the waves of blockchain hype are slowly moving away from Proof-of-Work, particularly because it’s portrayed as a waste of energy (more on that below), yet there are still are new coins in development that market themselves as ASIC resistant. As mentioned already, Ravencoin launched recently and it advertises itself as resistant by having the protocol switch between 16 different algorithms. Then there’s Grin, which is in development, that actually goes about this in a very interesting way. It’s not trying to be resistant, it’s just trying to be new by using a memory intensive PoW algorithm that will be easy to mass manufacture in the future to avoid GPU farms coming in instantly and dominating the network, allowing it to grow organically the way Bitcoin did. While I don’t think altcoins will disappear entirely anytime soon, the outlook for most of them medium-term is grim. I find it unlikely that ASIC resistance will continue to be a major selling point in the future, but likely that the hype-death cycle of altcoins will continue via other means of attraction.

4: Late Stage Mining Requires Low Barriers-To-Entry

In the first two sections I alluded to the underlying issue with trying to resist specialized hardware, and I’d hope the following conclusion has already been made: You can’t stop it. Instead of endlessly trying to stop something you can’t, an alternative approach would be to look at the situation rationally and find a new way to think about it.

As the title of this section suggests, I want to discuss the importance of having a low barrier-to-entry into the mining market, particularly in the “end game” scenario where a blockchain has become massively adopted. Ultimately this is the only thing that matters, because what’s the point in creating a temporarily semi-useful blockchain with no positive outlook to its future because only a few select entities can create the required hardware?

Major League Mining

Mining in its current state is chaotic, dirty, sort of disruptable, and there are too many blockchains to go around. Verge was 51% attacked, and it won’t be the last. Hashpower security (in the form of energy expenditure) is slowly starting to prove its necessity. Everyone has their opinion, but many refuse to think 50 or 100 years into the future when it becomes fundamentally important to have a good Proof-of-Work algorithm. If they do consider the future, they reference what we see today and claim it’ll have the same issues but worse. Putting the mining skeptics aside who prefer alternative options (like Proof-of-Stake), the pro-mining critics typically point at geographical & manufacturer centralization as growing concerns and will toss around fast-and-loose solutions, like arbitrarily changing the Proof-of-Work to something “better”.

Bitmain doesn’t have a monopoly on mining. They have a large stake in hashpower, but it’s not a monopoly. And, they’re losing more of that stake every day to more energy efficient hardware like Halong’s new DragonMint T1, and other manufacturers that are starting to produce their own ASICs outside of China, like the Japanese Internet giant GMO. I wouldn’t be surprised if others are engaging in this development in private as well, just like Halong was until the announcement, so you shouldn’t be either.

Minings intrinsic properties imply a never-ending race to be the most energy efficient and the end result will be mining on renewable energy, which will encourage farms to grow outside of China and in close proximity of those renewable resources. We’re already seeing this migration play out without renewable energy in locations where it’s just cheaper to cool off the hardware by being located in a colder climate. It becomes even easier to do this when you can get the hardware manufactured locally, or even do it yourself. So let’s take a step back and think, which is more difficult to manufacture? An advanced piece of hardware like a modern central processing unit, or a very specific and simple to produce chip that performs a very basic hashing algorithm?

If you don’t think renewable energy is going to dominate in the future, then you should just check out this publication by the International Energy Agency. I’ll just let some of the data do the talking but add in that in just 2017 alone, renewable energy additions were 40 times the amount of energy Bitcoin mining used in the same year. We’re going to be in such a surplus of energy that latency (transporting it) will become the energy supply bottleneck as demand grows. Do you think these power companies are going to standby and just let all the extra energy production go to waste? They’re going to be producing clean energy at rates faster than they can export it, so where do you think all of that is going to eventually go?

Headline: Lemonade Stand Startups Crippled By New Regulations

Probably the last headline you want to see as a Lemonade Stand entrepreneur when you wake up in the morning. In preparation for this day, you created a list of things that could potentially effect your new Lemonade business:

Tariffs on Lemon imports (costly to import Lemons from other countries)

Lemon farming has new regulations (reducing supply, increasing costs)

Lemon DNA patents are created (others can’t farm those kinds of lemons)

Major Lemon farm burns down (reducing supply, increasing costs)

Wouldn’t it be nice if you could just grow Lemons in your own backyard? Or rent your neighbors yard to grow Lemons for just this season, and rent then someone else’s yard next season if they have better rates? Would you have this freedom if only a limited set of your neighbors had the right kind of soil that could grow Lemon trees? Hopefully you see where I’m going with this.

When it comes to designing and fabricating hardware to process the PoW algorithm being used in Bitcoin, the last thing you want to see is 50 different companies trying to get the same single fabrication company to create hardware for them. Anyone can do research, but development ends with mass production, even if it’s just a single production run. The more complicated the hardware design is that you need created, the less likely you are to find a variety of chip manufacturers that can do this for you, and the ones ones that do exist may be production bottlenecked, or in some sort of binding contract.

Do you know why mining originally centralized in China? China has less regulations on hardware design, happened to have cheaper electricity (or it was easier to fraudulently get cheaper electricity), and the hardware was relatively easy to produce. Fundamentally though, it was because of the cheap electricity where they wanted to set up mining facility, and a low cost (distance) to transport from the manufacturer to the mining facility.

As renewable energy starts becoming more prominent, what do you think is a better scenario over the long term?

Complicated hardware designs that only a select few manufacturers can produce, and mining centralizes in distance around these locations. Simple hardware designs that many manufacturers can produce, and mining facilities can be reasonably spread out among the globe wherever it’s convenient to use renewable energy sources.

This kind of necessary diversity/distribution/decentralization in hardware production is promoted by a Proof-of-Work algorithm that is the opposite of complicated, the opposite of resistant, and not prone to getting changed.

We went over how new startups are coming online and expanding at this very moment, and that there will be more to come, but what would happen if they were stopped in their tracks?

What would happen if you have, let’s say, 10 manufacturers, but only 2 of them have been producing long enough to see a profit, and then suddenly all of their hardware is rendered obsolete?

Would they all be able to come back from that loss?

I’d bet 8 of them won’t, so what’s the point in crippling all of them except the largest ones who can recover from it and just start making new hardware?

10 manufacturers versus 2, which sounds more decentralized?

If you were a startup that was looking into mining, but you made no initial investment yet, what would you do after such a thing occurred?

Would you be more likely, or less likely to keep moving forward knowing that one day all your equipment will become obsolete?

Do you really want people being scared or hesitant to invest into mining?

How would this not result in monopolization of the mining ecosystem?

Why, again, do you think a Proof-of-Work change would help the ecosystem?

5: Changing Bitcoin’s PoW Solves Nothing

Now that I’ve successfully lured you this far into my ramblings, let’s go over some recent talks about trying to change Bitcoin’s Proof-of-Work, and why it Will-Never-Work. If you don’t know the difference between hard/soft-forks, here’s a primer that should be enough for this section.

Temporary Relief For Never Ending False Alarms