zooko: zooko: I’m really chagrined that I let it sound like we were committing to a social contract of ongoing ASIC-resistance. That is absolutely never what I had intended to commit to, because…

With all due respect, and best intentions aside, the project very much expressed the message of that social contract. Regardless of intent, this is something that can’t be put back into the box.

zooko: zooko: I’ve been trying to educate myself about the state of cryptocurrency mining.

As you do so, please take pains to carefully consider the state of Zcash/Equihash mining, in particular. As the originators of the Equihash algo, Zcash established a space. There are six or more coins using the Equihash algorithm, but Zcash attracts the lion’s share of hashpower because of the combination of high coin production and high coin value.

A global cottage industry of home miners has grown around using GPUs to mine Zcash and other GPU-minable coins, and much of this growth was based on confidence in your message of ASIC-resistance.

They invested in the Zcash project - and generated Founder’s Rewards for years - based in significant part on that perceived social contract.

zooko: zooko: In other words, why haven’t professional, large-scale GPU-mining operations already driven small-time miners out of business?

Think of the legions of Zcash miners who have one or two GPUs in a computer (or two) for unrelated reasons.

What is their incremental capital expense to become a miner? Zero dollars.

What is their incremental capital expense to allocate space, CRAC, power lines? Zero dollars.

Large-scale GPU mining operations can’t out-compete a zero-capital operation! This is part of why we’ve survived and thrived to the present day.

The large operation can participate in mining, but it can’t easily drive the small miner out of business by turning Equihash mining a money-losing proposition for them… so long as they must use similar hardware to what the existing small miners already have.

In theory, if mining with “spare GPU cycles” around the world becomes more commonplace, the home miners may collectively drive the margin down enough to make profitable business difficult for the big miners!

This also has the beneficial network effect of continuing the widespread distribution of coins, rather than concentrating them in the hands of a few - only 3.7 million Zcash have been mined; over 17 million are still to come, and mostly in the next few years.

zooko: zooko: One thing I’ve learned along the way is that GPU mining is absolutely essential to Zcashers in Venezuela.

It is also absolutely essential to Zcashers worldwide who are less affluent. The price of entry for a specialty miner - about a thousand dollars, paid months in advance - raises an insurmountable barrier for the vast majority of the world’s population. Over 70% of humanity still lives on less than $10 a day, and the divide between the rich and poor may be expanding.

Allowing specialty equipment to take over the Zcash mining space exacerbates that trend.

zooko: zooko: Even if ASIC-resistance is possible this year and next year, it will almost certainly become impossible given enough scale and enough years.

I’ve thought hard about this. You’re describing a potential cat-and-mouse game, where PoW changes just “delay the inevitable.” But we must consider that the “inevitable” end is a different place than the one we’re considering right now.

If the PoW is changed in a way that invalidates the current crop of specialty hardware, it will be confronted with a new crop of hardware that is more capable. This cycle can repeat.

But the changes made to thwart the specialty hardware push things in the direction of general computing. Each round of hardware - should the hardware makers choose to continue this war - will lead to more capable general-purpose computing equipment. It will not be as general as, say, a Personal Computer, but it will be a much more general memory-processing system than, say, a SHA-256 box.

This memory-processing equipment might one day be used for many of the purposes where GPUs are adopted out of convenience today - for scientific computing, for AI and research, for data analysis, as well as for various cryptographic tasks. These pieces of hardware will be bringing valuable new utility to the world beyond the crypto space, even while they support the crypto space… and these pieces of hardware will likely become a new class of commodity hardware. With lower cost and higher distribution, such hardware could remain available and accessible to a larger segment of the population than specialty hardware could ever be.

Several years from now, even assuming new hardware, the barriers to entry for the Zcasher will be lower than if GPU mining is abandoned today - and a great many coins will have been distributed globally.

A few years matter. Staving off this transistion for just a few years would be beneficial to the Zcash community, the GPU-mining community, and could lead to societally-beneficial developments in hardware.

zooko: zooko: And: distributing coins widely with a commodity PoW is fundamentally incompatible with locking miners into a sunk-cost-investment incentive-alignment with custom PoW, and the latter has advantages that might eventually prove to be important.

This sounds disturbingly similar to saying, “it may be preferable to abandon those who have voluntarily supported our project for years in favor of those willing to enslave themselves to it.”

That aside, I feel there’s a profound risk you’re not capturing here:

zooko: zooko: locking miners into a sunk-cost-investment incentive-alignment… has advantages that might eventually prove to be important

This makes sense if you imagine a world where Zcash enjoys a population of independent miners who each have a sunk-cost specialty hardware investment locking them to Zcash… but this “locking” concept goes both ways, and specialty crypto hardware is an inherently monopoly-tending business.

Given this, as a monopoly forms, Zcash may increasingly find itself up locked to a large monopolist (or tight oligopoly). Zcash can be locked to The Miner. Locking incentive alignment sounds great when it forces the other party to align with your intentions, but what happens if you’re forced to align with theirs? By the time power has centralized to a monopoly, they will likely have accumulated a market-moving quantity of Zcash, as well as a huge investment in hardware, space, contracts… and the Zcash Company’s goals and intentions will not be fully the same as The Miner’s. The only alignment, really, is that higher price is better… but does that really encompass the goals of the Zcash project? What if they are prepared to sacrifice some privacy for greater profit? Or for government leniency? Zcash may yet end up at loggerheads with The Miner.

One may think that in the unlikely event this happens, Zcash can simply change algorithms at some future date, but this comes with a new risk: Given their huge investment, wouldn’t The Miner be inclined to produce a fork of Zcash which remains on their specialty hardware? With huge hashpower, won’t this fork be inherently safer? And with their huge holding of Zcash, won’t they be able to afford a massive promotion for their new fork, funded by simultaneously selling off Zcash, driving down the price? They can even promote it as the “real” Zcash.

Some of this may sound familiar.

“Forking away” once a monopoly has already gained power may be more treacherous than we first think. Given the precedent in the fork of Bitcoin Cash from Bitcoin, we know that absolute Monopoly Power is not necessary to lead to conflicts of interest. What was once “we share a vested interest in the value of The coin” changes to “we’re more interested in This coin.”

Now, some may still doubt that specialty crypto hardware is an inherently monopoly-tending business… but it’s inescapable in the zero-sum game of mining. Partly because it’s zero-sum, it becomes a game of efficiency. Bigger players have economies of scale. They have smaller marginal costs. They get better contracts and pricing on bulk supply.

In fact, the monopoly tendency is created by the very same factors that allow the “professional, large-scale mining business” to drive out the “small-time miners” in the first place!

And once the small-time miners are gone, the monopolizing tendencies continue. What was once a big business is small compared to an even bigger business, and will be driven out, as every efficiency and capital advantage lead to greater consolidation. And the greatest advantage inevitably benefits the manufacturer, who can always put the most efficient hardware into service at the lowest cost.

This last part - greatest benefit accruing to the manufacturer - fundamentally happens because the full value of operating a crypto miner accrues to whoever owns and operates it. The same can not be said of a GPU.

A GPU manufacturer cannot profit from rendering all the world’s video for themselves; the primary function and value of their hardware is to allow others to run it. The viewing of video cannot be monopolized because it isn’t a scarce thing that can be collected. But running a miner creates something entirely different - cryptocurrency - and a manufacturer can certainly keep that.

When a manufacturer can earn more by not selling the product they manufacture, they will sell only as much hardware as they cannot put into service for themselves (or whatever they need for momentary cash flow). That is their greatest incentive - and the monopolizing tendency is relentless.

The large-scale miner’s incentive aligns best with profit, and that’s only a shallow alignment to the broader goals of the Zcash project.