Project Rundown with Vertcoin

Interview with Vertcoin on Altcoin Magazine

Vertcoin is an open-source cryptocurrency created in early 2014 that focuses on decentralization. Vertcoin uses a proof-of-work mechanism to issue new coins and incentivizes miners to secure the network and validate transactions.

Hey guys! Happy to connect today and learn more about the Vertcoin project! Can you tell us more about the founding of the project and what the problem is that you were addressing?

When Bitcoin was incepted, the vision behind it was “one CPU one vote”: everyone participating in the network was supposed to mine, and all of them were to share the rewards of running a financial currency. This is contrary to other currency systems that we use today, where only a select few are extracting rent from the system. However, as Bitcoin progressed, a lot of investment was done in getting more efficient hardware to do the necessary proof-of-work calculations, which ended up in specialized hardware dominating the network. Specialized hardware that is hard to obtain and has an economy of scale favoring large miners. The result is that there’s a very limited group of miners that dominate the Bitcoin network. So in a way, the rent is still extracted by a small group of people who can afford or produce specialized hardware.

Vertcoin was incepted at the time that Litecoin — which was initially created to resist mining on specialized hardware by altering the proof-of-work algorithm — also fell prey to the same problem. When ASICs were deployed on the Litecoin network and no one participating in the network saw that as a problem, Vertcoin was created. The specific goal is to resist specialized hardware used for mining and keeping the mining, and therewith the rewards for maintaining the ledger, as decentralized as possible. Vertcoin should be and always be mineable with commodity hardware you can buy at your local computer hardware store.

So, Vertcoin is basically a crypto project designed to curtail concentration in mining power in the interests of broad-based participation, right? How did you create the vision?

As mentioned in the previous answer, when Litecoin failed to achieve the goal of resisting specialized hardware, Vertcoin was created to specifically uphold this as its core value. Since specialized hardware has proven to increase the centralization of mining power by limiting the access to participate in consensus. With Vertcoin, all you need to participate in consensus is a computer with a recent graphics card.

What drives you to have this vision? Why are you passionate about this?

One of the major drivers behind the inception of cryptocurrencies was that it enables anyone to participate in maintaining a global ledger of transactions, without having to get permission from anyone. This was, and is, one of the most astonishing things about these networks. Moreover, by allowing anyone to participate, the rewards for maintaining the ledger are shared in an honest way with all participants.

Can you provide a demonstration of the product?

Vertcoin’s functionality as a currency is practically equal to what Bitcoin and Litecoin support. The key differentiating factor is its mining algorithm. What’s different is that you can mine it on your normal computer. If you have a recent NVIDIA or AMD graphics card in your computer, you should try our New One-Click Miner. It’s super easy to start mining with it!

Yet there’s still no slam-dunk argument in favor of ASIC-dominated cryptocurrencies. Vertcoin is similar to Litecoin and Bitcoin, however, Vertcoin’s consensus algorithm makes mining VTC ASIC-resistant, right? Tell us more about that.

It’s important to differentiate between the consensus algorithm and the proof-of-work algorithm. The consensus is reached the same way as with Bitcoin and Litecoin: the chain with the most cumulative work behind it is the canonical chain. This means that whenever a chain appears on the network with more cumulative work, it will become the new longest chain. That’s how nodes reach consensus on which chain is active.

Vertcoin does, however, have a different proof-of-work algorithm. In Bitcoin, the ‘work’ is done by double-hashing the block header with SHA-256. In Litecoin, this is done with Scrypt. Both algorithms have been implemented on specialized hardware (ASICs). Vertcoin started using Scrypt, but has since migrated to three iterations of Lyra2RE. This is a more complex hashing algorithm based on 5 hash functions underneath (Blake, Keccak, Cubehash, Skein, and BMW). By requiring more complex memory-hard hash functions, it is believed to be harder to implement this algorithm on an ASIC.

However, time has learned that no algorithm is impossible to implement on ASICs — and last year we’ve seen ASICs appear for our previous generation Lyra2REv2. That’s when we hard-forked to Lyra2REv3 — which is a fairly simple tweak that just shuffles the sequence of the underlying algorithms. While this is simple to implement on general-purpose hardware like a GPU (we released new miner software for GPUs fairly quickly) — for ASIC manufacturers this is not as trivial.

If anything, ASIC resistance is more of a social construct: we as a development team, maintaining the software for the Vertcoin network, have pledged that we don’t want specialized hardware mining the currency. And therefore, we will work on altering the proof-of-work mechanism as soon as a hardware implementation appears. Which is what we did. However, this is kind of an arms race: there will always be a monetary incentive to find increased performance for the proof-of-work function. So this is an ongoing battle.

We’re currently working on a new proof-of-work function to replace Lyra2REv3 in time. This proof-of-work algorithm dubbed Verthash is supposed to make the gap between GPU and specialized hardware small enough so that when ASICs are developed, their advantage is negligible and therefore we think the incentive to make them is very little. But there also, time will tell. Lyra2REv2 was good for its purpose for about 3 years. But no algorithm can guarantee to be ASIC-proof.

However, as more and more people began mining cryptocurrency, the mining difficulty on the Bitcoin network increased, requiring miners to continually upgrade or purchase new mining hardware to keep pace with the network and its mining-meta. What are the benefits of Vertcoin mining?

The benefit of Vertcoin mining is that you can do it competitively with ordinary hardware you find at your local computer shop. You don’t need specialized hardware from a specific manufacturer; any modern GPU will be able to mine Vertcoin.

As the complexity and competition in cryptocurrency mining increases, there is a concern that mining power (which is critical in keeping distributed, permissionless networks open) will become consolidated and be under the control of only the largest mining operations. How do you prevent that?

Our vision is to have all users of the currency to also be part of the consensus. Everyone using Vertcoin should be mining it as well, for two reasons: 1) they also share in the rewards for running the network and 2) the consensus is widely distributed and it becomes hard for a large entity to control the consensus on the network.

Vertcoin is one of the few cryptocurrencies left actively promoting the use of p2pool, which is a decentralized mining pool protocol. It ensures that even if more than half of the network hashrate is mining with p2pool, it will still not be under the control of a single entity. With centralized mining pools, there’s still the potential issue of a mining pool operator to effectively “control” the hashrate. The operator can do funky stuff such as block withholding or even conduct 51% attacks. While we haven’t seen Vertcoin mining pools execute active attacks, we have seen block withholding. The fact is that centralized pools control what the miners using them are mining — and they can use that power for good or evil.

How many miners are supporting Vertcoin?

The network hashrate is about 600 GH/s right now, which is the equivalent of 10,000 modern GPUs. We can’t really tell how much people that would be as participation in the consensus is pseudonymous and permissionless. We don’t know who’s mining and we don’t care. That’s the whole point of a decentralized currency network like ours. We are able to identify some of the mining pools since they pay the Coinbase reward to the same address over and over — and that makes them identifiable. But we don’t know the miners behind the pools.

What is the average block time on the Vertcoin network?

Blocks are emitted every 2.5 minutes. By using a difficulty adjustment algorithm that adjusts every block (the Kimoto Gravity Well), Vertcoin can handle large fluctuations in mining hashrate without the block time being affected too much.

What about the current block reward?

The current reward is 25 VTC per block, set to halve again around December 10, 2021.

Unlike many of the other altcoins that exist, Vertcoin did not have an ICO, airdrop, or pre-mine. What is the reason for this?

The vision of Vertcoin is to share the rewards equally amongst the network’s participants. In our view, that does not align with the creators of a coin holding large amounts of the network’s currency at their disposal. More so if they did not acquire these coins through the same rules anyone else should (by buying them off a market or mining them fairly).

While you could argue that holding currency by the creators is a good thing, since they can fund things needed to uphold the network, our vision is a little different. We think that if users of the network value the work of the creators, they can donate the money they hold in the network’s currency back to us. So we regularly fundraise within the community to pay for stuff.

Any Vertcoin held by the current development team members has been acquired through fair mining or purchase off a market. We hold all donated funds in a separate wallet that our users can easily track on our blockchain — and we account for all the spending we do from it in our monthly development updates.

Mining cryptocurrency has become expensive for many. Even if you own the best mining rig on the market, only running one mining rig is typically is not enough for you to make a profit due to the cost of electricity, the low probability that you have of solving the block, and the fraction of the reward you would receive if you were part of a cryptocurrency mining pool. Do you agree?

This solely depends on the price of power (and taxes) in your region — and your ability to tune your graphics cards to the optimum Hash-to-Watt ratio. There’s a lot to win in optimizing your hardware. For instance, if you have a mining rig that does 400MH/s and uses 1200W — but you can tune that to produce 350MH/s at 800W — going for the max power isn’t the best choice if your power costs are high.

It’s true though that a lot of places where power is expensive, mining cryptocurrency has become unprofitable. This is an effect of a global free market: anyone in the world can mine — so you are competing with people that pay 4c/kWh. They’ll keep mining happily while you have to shut off your mining rig because it costs more to run than it is making in coins.

The whole point of mining is to burn a finite resource (power) to receive rewards (coins). The entire chain from the power source to hash output is where you can search for optimizations. If you find ways to use less power to produce the same amount of hash you could still be competitive. But it’s hard if your power cost is 4–5 times that of your competition, that’s for sure.