Question (courtesy of Phyro): “Why does the amount of hashes matter to secure the network, shouldn’t it be energy expended?”

Answer: This is a great question, and really goes to the heart of the ECIP-1049 proposal, and why moving away from Ethash to Keccak256 will help secure Ethereum Classic. First of all, the expenditure of energy in a proof-of-work system is the most important factor for decentralization. Because energy is distributed all throughout the world, and energy is necessary to mine a proof of work coin, it follows that mining is distributed all throughout the world. This is especially true in Bitcoin mining, where miners set up in a variety of locations — the biggest being hydro-electric rich areas in the Northwestern United States and Southern China. Other popular areas to mine are particularly cool climate with cheap power like Russia, Canada, Norway, and Iceland.

Valatie Falls, upstate New York. Most power from the dam pictured is used to mine Bitcoin.

It’s fairly clear that if power is the limiting factor for mining, the system will be distributed globally. However, an important topic of debate is whether or not ASICs cause the system to be fragile because centralized chip makers can control most of the hashpower. This may have been true in the early days of Bitcoin, but it is false today. With a number of companies ranging from Innosilicon and Bitmain (China), to GMO (Japan), Bitfury (Europe and USA) all vying to create the most efficient miners possible. Keep in mind this is for an entirely new chip industry that didn’t exist even 10 years ago. Compare this to the fact that the only major graphics card manufacturers are AMD and Nvidia (publicly traded companies both based in USA)

This competitive liquidity exists in Bitcoin, because Bitcoin uses SHA256, a very standardized and efficient algorithm that is easy to produce ASICs for. Because it is so easy to produce ASICs, there are many companies that can do this. It decentralizes manufacturing. This is good, we want the deciding factor of mining profitability to be access to cheap power only.

Miners measure the effectiveness of their miners using a simple metric: W/Gh (watts of energy / gigahashes per second) — this is the only number that matters to miners, like MPG (miles per gallon) matters with fuel efficiency. We can see the increase in efficiency starting from the first SHA256 miners in 2013 (source)

Butterfly Labs Jalapeno (from 2013) does 4 W/GH

Antminer S3 (from 2014) does 1.3 W/GH (3.1x better)

Antminer S7 (from 2015) does .25 W/GH (5.2x better)

Antminer S9 (from 2016) does 0.098 W/GH (2.5x better)

Innosilicon T2 Terminator (from 2018) does 0.083 W/GH (1.18x better)

Innosilicon T3 Terminator (from 2019) does 0.049 W/Gh (1.69x better)

The lower the W/Gh number, the better because it means you can do more hashes with expending less energy. As you can see, every new year devices get more efficient. While Bitcoin ASICs are so new (less than 7 years) we can already start to see the same pattern that emerged in integrated circuits — Moore’s Law which says the number of transistors on chips doubles every 2 years. In crypto, we will see a “Nakamoto’s Law” — Bitcoin miner efficiency doubles every two years. The fact we have maintained Moore’s law since the 1970s is an amazing achievement of modern electrical engineering and economics.