The speed with which Bitmain has conquered the crypto mining industry is somewhat shocking, and has led to a difficult situation for thousands of smaller scale GPU mining operations. To give you a sense of the speed/efficiency advantage of a modern ASIC design versus a bunch of computers filled with the latest AMD/Nvidia GPUs, the latest release from Bitmain for Z-Cash can do the same amount of compute for under $2,000, using 300 watts of power, as the GPUs could do using at least 7,000 watts of power and costing over $25,000. As GPU miners have gotten more desperate — especially in the current bear market for crypto -currency— many have turned to renting out their mining rigs on sites such as miningrigrentals.com and nicehash.com.

On these sites, which are relatively unknown to many in the crypto-currency world, buyers place their bids in bitcoin to gain control of large amounts of computing power for various popular hashing algorithms (e.g., Equihash, X11, SHA-256, etc.) on an hourly basis. The combination of desperate miners with a glut of now-unprofitable GPUs, together with weak crypto prices, has led to the recent surge in double-spending attacks, which have collectively resulted in millions of dollars worth of losses for exchange companies. Such attacks are very negative events for the crypto projects that are targeted; in the worst case, they can lead to exchange delistings and the loss of market confidence in the security of the currency.

There is widespread disagreement about the best way to move forward from here. The Monero community recently decided to completely change the PoW system used once it became clear that Bitmain had developed an ASIC. Now that Z-Cash’s hash algorithm also has a new Bitmain ASIC available, that community is deeply divided over whether they should fight like Monero, or accept the inevitability of ASICs and hope for a more competitive market to develop, with numerous ASIC manufacturers keeping the system dynamic and decentralized, and with more hashes per second securing the network at a lower overall cost and carbon footprint. This optimistic path was the direction taken by the SiaCoin project, as detailed in a recent blog post by their lead developer. In the case of SiaCoin, they actually developed their own ASIC. But in a surprise blow, they were beaten to market by Bitmain, leading to unhappy equipment buyers who will end up earning a fraction of what they once projected.

Others have attempted a purely technological solution that would theoretically allow for the continued use of PoW while limiting the encroachment from ASIC based miners. This was the initial design goal of the PoW algorithm used for Ethereum, which was designed to be “memory hard” and thus less profitable to execute as an ASIC. The basic idea here is that computer memory (DRAM) is expensive, so if you require a large amount of memory to perform the computations — which Ether accomplishes by utilizing a large graph data structure called the DAG, which is multiple gigabytes in size — you can make the memory costs the dominant part of the overall cost structure. This a reasonable idea, and it seemed to work for a while, which meant that the only way to mine Ether or Z-Cash was to use a bunch of GPUs. While the GPU market is nearly as concentrated as the ASIC market by AMD and Nvidia, the situation there seems infinitely preferable to the Bitmain monoculture found in crypto-mining ASICs.

Unfortunately, the “memory hard” approach suffers from an obvious flaw: if you could find a way to store all that data in memory once, using a lot of expensive DRAM, but then share this data across a large group of inexpensive processors, you would effectively share the cost across a large number of processors and thus undermine the supposed difficulty of the problem. And this is exactly what has happened recently. Indeed, it is unclear exactly when it happened, since it is alleged that Bitmain mines with their new products for months before reselling them to the public, but they are now selling these units to the public, and “memory hardness” has turned out to not be particularly hard.