Wu Jihan's MARBLE speech: ASIC mining machines are inevitable, and they are the inevitable result of free and open competition

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Author/Asymmetric1211

The first international conference on mathematical research in blockchain economy, MARBLE 2019, is currently being held in Santorini, Greece. Official information shows that MARBLE 2019 focuses on the mathematical research behind blockchain, bridging the gap between practice and theory, and aims to provide a communication platform for the world's top mathematicians, computer scientists and economists to showcase the latest progress and innovative achievements in key blockchain theories.

Bitmain co-founder Jihan Wu attended the conference and gave a speech on cryptocurrency and mining, as well as why to choose the controversial PoW and ASIC mining machines.

In his opinion, PoW exists to solve the problem of double payment, and it is essentially a market economic model.

At the conference, Professor Patrick McCorry, an expert on cryptocurrency and decentralized systems at King's College London, live-broadcasted Wu Jihan's speech. The following is a summary of the key points of Wu Jihan's speech from Patrick McCorry's Twitter account:

PoW consensus is the most intuitive reflection of supply and demand, and it is not operated through centralized planning, but through economic incentives. A decentralized system should allow anyone to participate in the competition with fair incentives.

Why should we care about decentralization? Three reasons:

• Stability at the level of social contract - no central authority can change the established contract

• Network resiliency - shutting down a single node will not affect network operations

• Funds are safe - there is no central authority that can freeze or manipulate transactions

Specifically, Wu Jihan talked about three dimensions of decentralization in his speech, namely the governance dimension, the physical dimension, and the market dimension. In the governance dimension, he discussed the check and balance system. In the market dimension, all participants should be able to participate in free and fair competition and measure their own workload fairly.

He also talked about how the market can fail and lead to the emergence of centralized PoW.

Artificial barriers in the mining industry. For example, two to three years after Bitcoin, some cryptocurrencies introduced permissioned mining. In addition, there are price distortions caused by artificial manipulation.

He finally talked about insufficient incentives. For example, some miners are not mining for economic purposes (such as BSV), but for other artificial reasons.

Wu Jihan believes that it is a misunderstanding that ASIC will lead to centralization. In fact, the Ethereum network using GPU mining will also lead to centralization. The same is true for XMR, which actively prevents ASIC.

With Bitcoin ASIC mining algorithms, the situation is not much worse. The two largest mining pools currently control between 28.3% and 34.3% of the hashrate. This is much better than the situation in 2014. (But it is difficult to prove that two mining pools are not owned by the same person).

For many cryptocurrencies, the use of ASIC-resistant mining machines is not due to design considerations, but based on considerations of miner costs, because ASIC-resistant mining machines are much cheaper.

The emergence of dedicated mining machines is inevitable. It is the inevitable result of free and open competition and is selected by the market.

Trying to design ASIC-resistant miners is problematic, especially as it creates unfair competition for those who use ASIC miners.

Another problem with GPU mining is that it is controlled by two large companies, AMD and Nvidia, which makes it very difficult for new mining hardware manufacturers to enter the market.

Wu Jihan also proposed the concept of cost/operation ratio. He believes that ASIC will not only not lead to centralization, but will promote decentralization.

Specifically, the lower the ratio of mining machine cost to operating expenses, the more profitability will be affected by electricity costs.

For example, buying a ZEC mining machine is expensive, but will become cheaper over time. In contrast, the ratio of Bitcoin's cost to operating expenses is relatively balanced.

This means that ASICs can actually promote decentralization.