ASICs versus GPUs (Part 2)
In the “Two sides to every story” series, we will examine current controversies and issues in the blockchain space. Instead of choosing sides, we will do our best to present information from both (or more!) sides of the argument. Then, you decide!
In this series, our mission at CryptoMurmur is to provide you with information to help you sift through the facts and make your own decisions about where you stand on a topic. In Part 1 of the ASICs versus GPUs story, we examined the different tools that are used for the purpose of cryptocurrency mining. Today, in Part 2, we examine the controversial implications behind these choices.
Centralization versus decentralization
You can’t really discuss the topic of ASIC and GPU mining without getting into issues surrounding the concept of centralization. One of the greatest and most lofty aspirations of cryptocurrency technology was to enable the decentralization of the monetary system and the creation of “trustless” transactions.
Centralization is the idea that someone — an individual or small group of individuals — controls the means by which people interact, in this case, with money, but also with information, for example. In the traditional monetary system, a central power issues money and controls its value through a variety of means including interest rates as well as global economic and military influence. Because there is a central power that controls the system of interaction, everyone needs to entrust this central power with their key role in the transaction of value from one place to another.
With decentralization, where everybody plays a part in the system of interaction instead of a few enormously powerful entities, the need to trust any one group or individual disappears. If everyone can be a part of the transaction process and can see that monetary transactions are accurate and true via an open-source designed program with a ledger of transactions that can be viewed by anyone, there is no need to trust a central figure.
GPUs and decentralization
GPUs are common and relatively cheap to purchase. A standard gaming PC has at least one GPU in it, sometimes a pair. These video cards, distributed all over the world, allow for a widespread and highly decentralized network. ASICs on the other hand, are more specialized, quite expensive, and not nearly as common. They can not just be picked up in your average store (at least in most parts of the world), often cost thousands of dollars, and are a little more technically demanding in terms of setup as well. Therefore, ASICs by their own nature, contribute to a higher probability of centralization if accumulated and used by the fewer wealthier people who have the financial means to purchase them and set them up on a large scale.
Bitmain versus everybody else
It doesn’t just stop at individuals either. There are large mining pools operated by relatively few entities for some of the most popular Proof-of-Work coins, particularly Bitcoin. Bitmain, the major manufacturer of pretty much all popular ASICs (there are some competitors emerging on the scene which may diversify the market a little) owns some of the largest Bitcoin mining pools, Antpool and BTC.com. In fact, they own nearly 50% of all Bitcoin pools (as far as we know). This 50% figure is important and I will bring it back up later.
Point being, the manufacturer of the most powerful Bitcoin mining tool owns almost half of all the Bitcoin mining pools. This is not decentralization. At all. Now, whether or not you are bothered by that issue is entirely up to you, but just be aware that large entities like Bitmain are arguably facilitating the centralization of Bitcoin as well as a number of other cryptocurrencies.
Electricity costs around the world
Certain regions of the world allow for much cheaper electricity. This can be due to economic conditions or because of the ability for some geographical regions to generate electricity more cheaply from plentiful sources such as hydro-electric dams, for example.
Because the cost of electricity is hugely important in figuring out the profitability of any PoW mining operation, high-capacity mining operation investors are drawn to locations where the electricity is cheap. Unlike GPUs that are set up in households anywhere, it’s optimal to set up large-scale ASIC farms in concentrated areas where electricity is cheap. This is one of the big reasons why so much cryptocurrency mining is performed in China. Other regions of the world have been attracting attention as sources of cheap electricity, like Quebec, Canada, due to its surplus of hydro-electricity. This again contributes further to the problem of centralization.
Multi-million dollar ASIC farms versus multi-million dollar GPU farms
The flip side of this argument is that, theoretically, one could also set up a hugely expensive GPU farm if ASICs were to fall by the wayside for whatever reason. Therefore, GPUs themselves do not necessarily negate the centralization problem, although they reduce it due to their widespread availability and usage. It would be considerably more difficult to gain a disproportionately high amount of hashing power with a concentration of GPU farms simply because there are already so many GPUs distributed around the world to users. Yet, if a GPU were to be designed that was highly powerful, efficient, and expensive, it could theoretically result in a similar problem, anyway.
So, this whole situation isn’t so straightforward, after all! But there’s more to think about. In Part 3, we will examine the problem of 51% attacks and developer responses to the ASIC problem.