Fundamental Labs: In-depth analysis of the computing power competition behind the launch of Nervos mainnet

With the launch of the new popular PoW public chain mainnet such as Nervos, the process of competition and balance of PoW public chain computing power before the emergence of ASIC mining machines has once again attracted attention. Generally speaking, the degree of matching between the mining algorithm and the characteristics of the mining machine device affects the market share of a certain type of mining machine. During the launch of the Nervos mainnet, the performance of FPGA mining machines was particularly eye-catching.

Although FPGA mining machines, which are frequently mentioned and discussed in the history of the mining industry, have never been mass-produced and sold, their impact on the ecology of the PoW public chain cannot be ignored. Our research results show that FPGA mining machines are very likely to erode the computing power share of GPUs before the emergence of ASICs on a large scale, becoming the most powerful tool for increasing computing power.

The author of this article, Yan Xin, works at the blockchain investment institution Fundamental Labs.

What is FPGA?

Let us start by simply popularizing the basic concepts of what is "FPGA" and what is "ASIC".

FPGA is the abbreviation of "Field Programmable Gate Array", which is a semi-custom circuit.

ASIC is the abbreviation of "Application Specific Integrated Circuit", which is the optimal solution for a fixed algorithm. However, ASIC production is expensive, with the cost of one wafer being around 10 million RMB. Its cost advantage can only be reflected in mature, stable, and high-demand application scenarios.

For scenarios such as digital asset mining or machine learning where the operation logic needs to change frequently or the chip demand is relatively small, FPGA has a place with its operation speed comparable to ASIC and the feature of algorithm updateability. FPGA is also often used to verify the operation logic in the ASIC being designed.

In a sense, FPGA is a substitute before the emergence of ASIC, and plays a unique role in scenarios with high uncertainty.

FPGA internal structure:

FPGA and GPU can also be programmed to perform various computing tasks, but the computing logic of FPGA is implemented through a logic gate array based on a lookup table, which does not rely on the von Neumann structure. The result of one operation is directly fed to the input of the next operation without being temporarily saved in the main memory. Therefore, not only is the bandwidth requirement for internal memory much lower than that of GPU, but it also has the characteristics of fast response and lower power consumption. Therefore, FPGA can show unmatched advantages over GPU for some algorithms with small memory requirements and pipeline processing.

From “ASIC Resistant” to “ASIC Friendly”

In order to discuss the future trends of FPGA mining machines in more depth, we need to sort out the historical context of the development of mining machines.

After BTC was monopolized by various dedicated computing devices, a number of early "altcoins" such as Litecoin began to embody the idea of ​​"Anti-ASIC" (preventing ASIC mining) in the design of mining algorithms. This design aims to allow more enthusiasts to participate in the mining of new digital assets with ordinary computers, thereby promoting the decentralization of the digital assets. However, this "Anti-ASIC" ideal model has always been proven to be unsustainable in the long run, and the delicate balance can easily collapse after the prosperity of a certain digital asset. Driven by interests, dedicated mining machines corresponding to Anti-ASIC were soon launched.

Although Anti-ASIC itself is indeed an unsustainable process, this process has brought benefits to the development of a large number of digital assets. Therefore, it has been imitated for quite a long time and various Anti-ASIC algorithms have been designed.

Generally speaking, there are three main design ideas for Anti-ASIC algorithms:

• Memory-dependent algorithms, such as Cuckoo Cycle, Equihash, and Scrypt. These algorithms increase the size of the computational input, requiring FPGAs and ASICs to add additional memory outside of the existing computational units, increasing the difficulty of FPGA and ASIC design and reducing their relative advantages.

• A mixture of multiple algorithms, such as X11, X13, and X16R. These algorithms increase the complexity of FPGA and ASIC by introducing several hash algorithms in series at the same time. Later, algorithms that randomly connect multiple algorithms in series were derived, further raising the design threshold of FPGA and ASIC.

• Regularly changing algorithms. Some digital assets regularly change their mining algorithms or algorithm parameters, which makes dedicated mining equipment regularly obsolete, and is considered a fundamental anti-ASIC method.

The development of the Anti-ASIC algorithm has given GPU mining a lot of room, and has gradually made it the main Altcoin mining equipment, but its side effects have also gradually emerged:

• First of all, GPU miners have no loyalty. The only criterion for most GPU miners to choose mining targets is the daily output. Once the price of a digital asset drops sharply, the computing power will drop sharply. For the proof-of-work blockchain that relies on computing power to maintain network security, the robustness of its network will drop rapidly after the computing power drops, making it extremely vulnerable to 51% attacks.

• Second, it cannot provide excess returns to its miners. Due to the huge stock of GPUs, the mining revenue of any digital asset that exceeds Ethereum will be quickly flattened by the influx of computing power, so miners cannot get corresponding incentives and cannot become active builders of the currency.

GPU mining targets are sorted from high to low in terms of daily revenue. ETH ranks third, with a small gap from the top two.

• Third, the maturity of GPU mining has made the original purpose of Anti-ASIC ineffective, that is, it is impossible to enable more ordinary enthusiasts to participate in mining, and mining is completely monopolized by GPU miners.

• Fourth, the stock of GPUs is huge. In addition to the GPU mining machines that have been put into mining, there are still a large number of GPUs in the hands of MSPs. Under the national strategic background, the National Development and Reform Commission has deleted virtual currency mining and other contents from the eliminated industries in the "Guidelines for Industrial Structure Adjustment". In the future, the entry of real GPU computing power giants is not far away. The excess income of GPU mining relative to the social average investment return rate will be infinitely diluted in the process of the surge in GPU computing power.

• In addition to the above four points, regular forks or algorithm changes will lead to the division of the community. In the long run, it will be difficult for the community to grow and develop.

More and more developers are more conservative about Anti-ASIC, or design rules to guide the hash rate to gradually transition to ASIC in a regular manner. Grin is a good example, but because the Cuckoo Cycle algorithm itself still has very high memory requirements, mining machine manufacturers have not yet successfully launched products as planned.

Nervos, which was recently launched, designed an ASIC-Friendly SHA3-based Eaglesong algorithm. This algorithm does not require large memory or involve complex algorithms. Its main content is multiple iterations of a simple hash algorithm, which facilitates pipeline processing in FPGAs and ASICs.

The core of Eaglesong Hash is 42 iterations of the transformation function f

In summary, the transition from ASIC Resistant to ASIC Friendly is entirely possible to be the beginning of a new direction, and FPGA will replace GPU in this process and become the best mining tool before the emergence of ASIC.

Why is it always difficult to produce Altcoin ASIC mining machines?

Since the beginning of this year, mainstream mining machine companies such as Bitmain, Canaan Creative and MicroBT have stopped horizontally expanding their Altcoin ASIC mining machine product lines. The simplest explanation is the risk-return imbalance.

Compared with GPU, ASIC mining energy efficiency ratio has an absolute advantage of 10 times. Due to the diminishing marginal cost effect, ASIC producers will inevitably tend to overproduce ASIC to seize the computing power share, increase the difficulty, and quickly squeeze out GPU miners. The small currency mining machine itself has a small capacity and a limited number of mining machines that can be produced and sold, which inevitably causes the problem of centralization. FPGA is more like GPU here, with a fundamental advantage, that is, FPGA itself is produced by major manufacturers such as Xilinx and Intel. Each FPGA mining machine is nothing more than purchasing different FPGAs that have been produced for circuit board-level hardware design and software algorithm optimization. Both of these contents are not as closed and "high-precision" as the ASIC layout, and the products of each company will not be too different, which can better promote decentralization.

According to MRFR statistics, among the major FPGA manufacturers, Xilinx and Intel have a cumulative market share of 72%.

ASIC is a winner-takes-all game. ASICs designed for the same algorithm using different foundries, different processes, or different design methods may have several times the performance difference. Due to the adaptive adjustment of the difficulty of the blockchain network, computing devices with inferior performance may face brutal elimination. Therefore, manufacturers strictly keep product parameters confidential, further exacerbating the risk of capital investment.

As a programmable device, even obsolete second-hand FPGAs are still widely used in scenarios such as blasting where their durability does not need to be tested, and they are not worthless like obsolete ASICs.

Having ASIC means having a say in computing power, but this does not mean having a say in community governance. If an ASIC harms the interests of most community members, the currency is likely to completely exclude the ASIC designer by modifying the mining algorithm through a fork. For example, in early October, Ravencoin upgraded its mining algorithm to an upgraded version of X16R, "X16Rv2", to prevent ASIC miners on the Ravencoin network from continuing to mine. This algorithm change left many ASIC teams at a loss, and FPGA miners, as the most flexible mining machines for algorithm changes, quickly flooded into the computing power market.

FPGA is not a replacement for GPU.

It is a new choice that is more suitable for ASIC-friendly algorithms

In essence, mining is a process of increasing network computing power through block rewards, thereby increasing the cost of attacks. A properly designed mining algorithm should motivate miners to provide services to the network stably. In this regard, ASIC has an irreplaceable advantage, but before the volume of a certain digital asset cannot support the emergence of ASIC mining machines, FPGA and GPU essentially play the same role. The difference between the two is the difference in inventory and the difference in the matching degree between their own characteristics and the algorithm design concept.

At present, the availability of GPU computing power (huge stock, stable supply, output and smooth distribution channels) far exceeds that of FPGA computing power. However, if the trend from ASIC Resistant to ASIC Friendly is established and continues to develop, FPGA will inevitably tip the balance of computing power flow and become a powerful tool for new currencies to increase computing power.

Yan XinAuthor

Edited by Sonny Sun

Roy Typography

The content is for reference only and is not intended as investment advice. Please assume all risks