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Bitcoin uses a Proof of Work algorithm that makes it the perfect victim of ASIC mining. As a result, hash power is not very decentralized (more than 50% of Bitcoin's hash power is concentrated in China and most of that is concentrated in a small area). Furthermore, considering the fact that just a handful of companies produce efficient ASIC hardware, those companies essentially have complete control over the hashing power of the entire network.

Other algorithms have been developed that are memory intensive and are ASIC-resistant.

Is there a reason why Bitcoin won't move to ASIC-resistant algorithms (aside from the fact that it would require a hard fork)? In other words, do ASIC-prone algorithms fundamentally provide any benefit (in terms of security or scalability) over ASIC-resistant algorithms?

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ASIC-resistance is a mirage. Application Specific Integrated Circuits (ASICs) are made to do one thing only and will always beat general purpose hardware.

"General purpose computational devices like CPUs, GPUs, and even DRAM all make substantial compromises to their true potential in order to be useful for general computation."
–David Vorick, "State of Cryptocurrency Mining"

As an "ASIC-resistant" cryptocurrency appreciates in value, eventually someone would find it economically viable to produce an ASIC. Given the high development cost and relatively lower increase in profitability, for an ASIC-resistant algorithm such a market would be even more likely to be dominated by a single producer.

Instead, consider the upsides of an ASIC-friendly hashing algorithm. ASICs beat general purpose hardware by magnitudes which quickly curbed botnets mining with CPU or GPU. As ASICs are the most efficient tools to turn power into security, similar dominance of all available hash rate to Bitcoin's security would take magnitudes more CPUs or GPUs at vastly worse energy efficiency. It's easier for manufacturers to enter the market, which opens production up to more competition. Since the hardware is network specific, miners cannot hop networks to pursue every tiny shift in relative profitability, resulting in a more stable hash rate. Due to the upfront cost of the hardware, miners are—quite literally—invested in the success of the network.

After over a decade, ASICs have caught up to state-of-the-art miniaturization. Product cycles have slowed down. This reduces the advantage of mining operators with close ties to manufacturers, as the longer lifespan of hardware allows it to spread further geographically. When machines run longer, the initial hardware investment is smaller compared to the on-going energy costs which favors locations with cheap electricity. While China does have relatively cheap electricity, there are various regions with stranded energy due to abundant hydro, solar, or geothermal sources all across the globe. While previously most hash rate was situated in China, the recent crackdown on the Bitcoin mining industry there has expedited an already existing downward trend. Hopefully a lot of the currently migrating hash rate will show up in numerous different locales.

Finally, a change of the hashing algorithm would necessarily require a hard fork. Given the doubtful benefits, such a hard fork would be extremely controversial.

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  • This ignores the possibility of proof of work functions which together form a Turing complete language. An ASIC that could generate proofs for such work would be indistinguishable from a CPU. Interim ASIC resistant functions would be useful as stepping stones towards this goal because they shift the attention of innovators from finding faster hardware to finding a more useful work function. – MatrixManAtYrService 2 days ago
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The downsides outweigh the upsides: as you mentioned this would require a hard fork, and would leave everyone (not just mining farms) who owns a Bitcoin miner with a very expensive paperweight, and as such it's unlikely a large enough portion of the community is willing to make the change for it to be successful. It would require throwing away a significant amount of infrastructure.

I suppose one day if it were to become a problem where Bitcoin miners are colluding to try and rewrite the blockchain or censor transactions, then we could reevaluate this. However, mining already comes with such razor-thin margins that it is extremely unlikely miners will be throwing away their profits to do this: they would all have to agree to work against their own best interests.

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    Furthermore, ASICs are inevitable. There are two types of PoW functions: those for which ASICs exist, and those for which it hasn't been economically viable yet to construct them. But in the end, given sufficient incentives to invest in the necessary R&D, custom-designed silicon is always going to be more power efficient than generic hardware. Resetting the PoW function is at best pushing the can a few years down the road, at the cost of an enormously invasive (and possibly divisive...) action that probably nobody could convince the ecosystem to take. – Pieter Wuille Jan 24 at 5:27
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    It’s additionally impossible to prevent the persons responsible for making the change to proof of work from pre-producing their own ASICs. – Anonymous Jan 24 at 6:16
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    Also, making a PoW function ASIC resistant would result in less ASIC designs being developed, due to the increased cost of ASIC design, increasing the centralizing effect of ASICs. – user1937198 Jan 24 at 13:44
  • To add to Pieter's comment, Andrew Poelstra addresses this matter more at length there: diyhpl.us/~bryan/papers2/bitcoin/asic-faq.pdf . – darosior Jun 22 at 10:59
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Bitcoin uses a Proof of Work algorithm that makes it the perfect victim of ASIC mining. As a result, it is not very decentralized (more than 50% of Bitcoin's hash power is concentrated in China and most of that is concentrated in a small area). Furthermore, considering the fact that just a handful of companies produce efficient ASIC hardware those companies essentially have complete control over the hashing power of the entire network.

  1. Using the term "victim" is your opinion. China dominates in hardware and cheap electricity which is not limited to Bitcoin but other things people or industries use in electronics, computers, mobile etc. It is expected that most of the manufacturers and miners will be from a place them has better incentives to do so. Although I do not consider it being more than 50%. Mining pools are mostly based in China but miners are around the world and difficult to locate and get accurate numbers. The articles that I have read about such stats involve lot of assumptions that fits the narrative.

  2. Stratum v2 will help in decentralization to some extent if you consider few mining pools are responsible for most of the hashrate: https://braiins.com/blog/stratum-v2-bitcoin-decentralization

  3. Miners from other countries have started to join including Venezuela, Pakistan, Iran, Russia etc.

    https://www.vice.com/en/article/k7a3j3/venezuelas-socialist-regime-is-mining-bitcoin-in-a-bunker-to-generate-cash

    https://www.bolnews.com/latest/2021/01/khyber-pakhtunkhwa-government-to-install-two-bitcoin-mining-plants/

    https://www.trustnodes.com/2020/10/29/iran-changes-law-to-use-bitcoin-for-imports

    https://www.coindesk.com/russian-oil-drilling-giant-opens-mining-farm

  4. Is there a reason why Bitcoin won't move to ASIC resistant algorithms (aside from the fact that it would require a hard fork)? In other words, do ASIC-prone algorithms fundamentally provide any benefit (in terms of security or scalability) over ASIC resistant algorithms?

    One of the drawbacks in using such algorithms is mining by botnets. Exploiting backdoored machines (So many CPUs online right now are easy targets for hackers and governments).

    Example: https://www.coindesk.com/botnet-infected-5000-computers-monero-miner

    Bitcoin needs hashpower that is relatively stable, focused on bitcoin mining and secures it for long term.

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  • What I can see under the current system (something that would kill Bitcoin) is a partially coordinated effort for don t accept or mine or help mine (through a mining pool) blocks containing transactions from the designated specific Bitcoin address! Or you ll be charged with money laundering with the requirements to declare and be able to proof which blocks your mining income does come from when filling taxes (thus non compliance would turn mining income into black money). Because of the haspower repartition, the longest chain would turn Bitcoin into a legal but censored payment system. – user2284570 Jan 24 at 14:51
  • This has been answered on Reddit and Twitter in different posts/threads. You can ask a new question here on SE if interested to know possible solutions against such things. – Prayank Jan 24 at 15:07
  • I never saw that specific concern with that type of regulation answered anywhere. – user2284570 Jan 24 at 15:13

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