Monero has more reasons to fight centralisation than most, and is hitting at ASIC mining to do it.
Decentralisation isn’t just a buzzword. It’s a very real function in cryptocurrency with tangible impacts. In the case of proof-of-work cryptocurrencies where coins are mined by processing power, an entity with enough hashing (mining) power could gain control of the entire network.
In a large enough network, this is extremely unlikely because you’d need an unfeasibly huge amount of hashing power to do it.
But you might also run into problems when the mining power isn’t sufficiently diverse. For example, if too much is in one physical location then an earthquake might knock it out or remove enough power for someone else to seize control of the network.
Or if most of the hashing power comes from one type of hardware, then that might also be a centralised point of failure. This is what Monero’s concerned with, and why it’s planning a hard fork in the near future.
A hard fork is essentially a type of software upgrade. It’s called a fork because it essentially diverts the network down a new path. Those who don’t follow the new path will be left on the old prong, with a cryptocurrency that’s no longer the “official” version.
These are usually done fairly painlessly, but sometimes coins will schism if they can’t agree which path to follow.
What to do
- If you are a Monero holder: Nothing. You might not even know it’s happened.
- If you are a Monero node operator: You will need to upgrade to the newer software, as you might have done many times before.
At the time of writing the date of the Monero hard fork has yet to be set.
What this fork does
This Monero fork will change Monero’s CryptoNight proof-of-work algorithm to prevent it from being effectively mined by application specific integrated circuit (ASIC) hardware. ASIC hardware is purpose-built to be extremely good at certain tasks. In this case mining cryptocurrencies.
If too many people start mining Monero with ASIC hardware, the network risks becoming too centralised. The CryptoNight algorithm was designed to encourage mining with CPUs and GPUs – your everyday home computer parts – instead. By limiting the effectiveness of ASIC hardware, and encouraging mining with CPUs and GPUs, the network can remain decentralised and more secure.
The combination of anonymity, value and CPU/GPU-mineability is why Monero is usually the chosen cryptocurrency in cryptojacking attacks.
The bitcoin network has been largely given over to ASIC mining, but Monero might have more reason to be concerned. It’s designed for absolute anonymity and has gotten a justified reputation as one of the preferred currencies for illegal purchases, North Koreans or for anyone else that wants their money to remain untraceable. Authorities have many good reasons to want Monero gone, and ASIC hardware presents one of the most likely avenues for this.
This is because there are very few manufacturers able to produce ASIC hardware in a cost-effective manner. As the Monero Project’s statement explains:
“This creates a single point of failure. For instance, a government could require these ASIC manufacturers to add a “kill-switch” which allows them to shut down a miner remotely or otherwise control it. This threat has the potential to destroy the whole network. In a similar fashion, governments could require miners to have a license to buy and operate ASICs, thereby confining ASICs to a certain group of licensed people. Furthermore, licensing could ultimately lead to blacklisting certain transactions, i.e., governments can require miners to not mine certain transactions, where disobedience would result in miners having their license revoked. By contrast, introducing a license to operate general purpose hardware is probably an infeasible endeavor.”
ASIC mining also leads to physical consolidation of hashing power and bitcoin-style cryptocurrency mining farms. A coin like Monero naturally wants to avoid having its network run across a small handful of physical locations where someone could attack the network by kicking a few doors in.
The Monero team’s update also mentions that ASIC mining might be the inevitable future, but that if it does start allowing ASIC hardware to cost-effectively mine the CryptoNight algorithm, the rollout will need to be done in an egalitarian way to make sure the processing power is spread out and decentralised.
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Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, XRB, SALT, BTC