What is ASIC-Resistant in Crypto Mining?

ASIC is an acronym for Application-Specific Integrated Circuit (ASIC) that specifically performs a use case. They differ from general-purpose circuits, such as the CPUs or GPUS, that power our computers and mobile devices.

In crypto, the term ASIC refers to the specialized hardware developed and regularly improved by companies such as Bitmain and Halong Mining. These ASICs miners are actively deployed in most proof-of-work networks like Bitcoin and Litecoin.

What is an ASIC-Resistant Cryptocurrency?

There are some coins whose algorithms make it impossible for the deployment of ASICs. 

Since it is ineffective to use such miners, only GPUs and other less powerful graphic cards can be used for mining. 

Networks with such capabilities are ASIC-resistant.

What Is Cryptocurrency Mining?

Crypto mining is a tedious activity involving hardware performing myriad hashing functions until a valid hash output is produced. 

The miner who finds a valid hash uses it as proof of their work, granting them the right to validate the next block of transactions and collect the block reward.

Disadvantages of Restricting ASICs to a Use Case

Although ASICs can be highly efficient, being restricted to a particular use case makes them useless for doing anything else. Moreover, the continuous technological advances in cryptocurrency bring new ASIC models that quickly render older designs completely unprofitable.

Controversy Surrounding ASICs

There is an intense debate regarding the centralization of mining power caused by ASICs. 

On the one hand, they provide the much-needed hash power for securing and verifying blockchains. 

However, they also centralize the power of mining into the hands of a few mining companies who can afford to buy thousands of ASICs to set up and run large mining farms and mining pools.

Benefits of ASIC resistance

Because ASIC miners use rare, powerful, and pricy gear, there is the risk of deploying farms controlling a major portion of the network’s hashing power. This is because average cryptocurrency miners cannot generate the computing power required to match these major mining farms’ hashing rate and hashing power using consumer-grade hardware like personal computers. Subsequently, there is the unintended consequence of hash rate centralization, jeopardizing the security and integrity of the network.

ASIC-resistant cryptocurrencies are a way to challenge this centralization of the hashing power of a blockchain network. 

The protocol and mining algorithm of ASIC-resistant cryptocurrencies are such that it is almost not profitable mining them with ASIC machines. Sometimes, it is even worse than using generalized CPU and GPU hardware.

However, the hashing algorithm of ASIC-resistant cryptos is constantly modified and improved as ASIC manufacturers continuously improve on the ASIC miners. There are newer versions of mining rigs that by-pass the ASIC-resistance of some networks, a threat to these platforms’ decentralization efforts. 

Examples of ASIC-Resistant Cryptocurrencies

Ethereum is the most popular and largest cryptocurrency with the most ASIC-resistant hashing algorithm called Ethash. 

The Ethereum mining algorithm was designed to be ASIC-resistant to lower the entry barrier for individual miners and encourage the formation of effective mining pool communities, effectively decentralizing the network.

Other notable coins with ASIC-resistant hash functions include Monero (MXR), Vertcoin (VTC), Horizon (ZEN), etc.