The developers of programmatic proof-of-work (ProgPoW), a proposed modification to the Ethereum network’s current PoW-based consensus mechanism, reportedly aim to use mining algorithms that are best-suited for GPUs.
According to ProgPoW’s creators, the new consensus protocol for Ethereum will allow for greater decentralization of the blockchain network’s mining process. As explained by its developers, ProgPoW has been designed to be ASIC-resistant (to a considerable extent).
This means that miners who purchase expensive ASIC chips to mine ether (ETH) should have no meaningful advantage over other miners when it comes to having a chance at validating blocks of transactions on the Ethereum network.
ProgPoW’s Creators Acknowedge Current Challenges With New Mining Algo
However, Dovey Wan, one of the founding partners at Primitive Ventures, a VC firm that has reportedly invested an undisclosed amount in Dfinity, zcash (ZEC), and several other crypto projects, has argued that ProgPow’s current version “worsens the performance gap” between the most commonly-used GPU models for mining ether.
In her extensive post on Coindesk, co-authored by Martina Long (also partner at Primitive Ventures), Wan claims that newly released, high-end GPUs made by Nvidia and AMD (RTX 2080, Vega 64, and Titan X) will actually make it easier to mine ETH for the miners that use them. According to Wan’s post, ProgPoW’s creators have acknowledged that their new mining algorithm is optimized for some of the latest GPU models. The team behind the newly proposed ProgPoW mining protocol is also reportedly working on improving the algorithm so that it allows miners with less expensive hardware to also have a fair chance at mining ETH.
Wan and Long’s detailed post mentions that ProgPoW, which aims to solve the “ASIC threat,” is not “as much of a problem as one might think.” According to Ethereum’s developers, the smart contract platform’s current mining algorithm (Ethash) is “already one of the most ASIC-resistant,” the founders at Primitive Ventures noted.
Furthemore, the post pointed out that high-performing ASICs designed for mining ether are unable to deliver “a mere 2-4x improvement over GPU mining.” Wan and Long claim in their blog that using ProgPoW as Ethereum’s mining algorithm will “further centralize” the blockchain network.
Amount Of Ether Being Mined With ASICs Is Very Low
Moreover, Ethereum co-founder Vitalik Buterin had said in April 2018 (during a bi-weekly meeting held by Ethereum’s developers):
If you look at the E3 that was released a few days ago the efficiency gains are relatively small compared to existing GPUs. My Chinese sources indicate a 220 MH/s miner costs about $2,500, while Bitmain is offering a 180 MH/s for $800, which is only a 2.5x factor of improvement.
According to several sources, the percentage or amount of total ether mining carried out by ASICs is unknown, however there seems to be a general consensus that it’s fairly low. Wan and Long conclude in their post that “the ‘ASIC problem’ is largely a non-issue for Ethereum.”
Going on to explain why there may be no legitimate “ASIC threat” to Ethereum, the post from Primitive Ventures’ founders notes that ASICs are highly specialized types of hardware that are designed to specifically do one thing really well. This being, the founders and crypto investors note, is to efficiently (and cost-effectively) mine ETH.
GPU Mining Does Not Allow For Greater Decentralization?
Because of their high cost, an ASIC for mining ether or any other cryptocurrency “must have long-term potential to be worth the high upfront cost to miners,” the post mentions. However, the Ethereum network is expected to transition from its current PoW-based consensus to a proof-of-stake (PoS)-based consensus protocol. Therefore, Wan and Long have argued that “it doesn’t make economic sense for most miners to further massively invest in Ethereum ASICs for their brief lifespan.”
Those who support using ASIC-resistant mining hardware believe that giving (theoretically) equal opportunity to all miners, even those who use GPUs or less expensive mining equipment, allows for greater decentralization.
However, Wan and Long reveal that even GPU mining “is largely concentrated in mining pools or farms, not in the hands of individual hobbyists.” The Chinese crypto investors further note in their post that “centralization in pools” does not occur because ASICs are not accessible. They argue that mining pools may promote centralization because of “the benefit that economies of scale provide in giving miners belonging to pools a steadier payout.”
ASICs Only Sell For 5% Of Their Original Value
In a detailed Twitter thread posted (on March 9th), Wan explained to her followers on Twitter:
A brutal fact why ASICs [are] a much more reliable security expenditure than general purpose hardware: Used ASICs can only resell for ~5% of [their] original value, and GPUs can resell for over 50%. Even if $ETH goes to zero tomorrow, GPU price in the secondary market wouldn't move.
The sunk cost of both ASIC development and investment, plus ASIC is worthless without the only chain it's designed for, makes ASIC miner's incentive perfectly compatible with the wellness of the chain they protect.
Responding to Wan’s arguments, prominent crypto analyst Alex Kruger remarked:
Great point, though secondary market GPU prices did crash with $ETH, and so did Nvidia.