Is the GPU manufacturer's conspiracy? Is Ethereum's ProgPow algorithm really as good as imagined?

This article is from CoinDesk, original author: Dovey Wan, Martina Long

Odaily Planet Daily Translator | Moni

Recently, some people in the industry have proposed using "Programmatic Proof of Work (ProgPoW)" to replace the existing Ethereum Proof of Work algorithm. ProgPoW supporters hope to change the paradigm of the Ethereum mining industry. They believe that Ethereum should use an algorithm that can optimize GPUs to achieve decentralized mining, rather than developing corresponding mining hardware equipment to match the algorithm, because doing so would be a bit "wasteful".

Compared with ordinary commercial mining machines, ProgPow does seem to reduce the mining advantages of ASIC mining machines to a great extent, making mining easier and more decentralized. However, if you analyze it carefully, you will find that ProgPow does not actually achieve true "democratic mining" as it claims.

In fact, the current ProgPow approach has made the performance gap between different GPU models become larger and larger. Miners may have to buy newer and more expensive GPU models from Nvidia and AMD, such as RTX 2080, TitanX, and Vega64. And the team that proposed the implementation of ProgPow also admitted that it is an indisputable fact that the algorithm is optimized for certain GPUs. However, the work done by the team is open and transparent. They are also actively developing an updated version of the ProgPow algorithm to make it fairer to all GPU models. (If an updated version is released, we will also update the performance benchmark results)

The following table shows the reduction in computing power when using Ethereum's current proof-of-work mining algorithm Ethash and ProgPow algorithms for different GPU mining (data source: https://medium.com/@ifdefelse/). The GPU models "preferred" by ProgPow have been highlighted in red. It is undeniable that the computing power growth under the ProgPow algorithm is much larger at this stage, and the bandwidth utilization rate has also improved.

If Ethereum implements the ProgPow algorithm, it may help concentrate miners in mining farms with high-end GPUs, and it will also stimulate mining farms to upgrade their GPUs to the latest models.

In fact, there is no “ASIC threat” problem

ProgPow claims to solve the "ASIC threat" problem of Ethereum, but this threat is not as serious as people think. Even ProgPow developers admit that Ethereum's mining algorithm is actually one of the most resistant to ASIC mining machines. The best Ethereum ASIC mining machine is only 2-4 times better than the GPU mining machine. In comparison, Bitcoin can't do this at all.

Moreover, Ethereum founder Vitalik Buterin, also known as “V God”, has not actually worried about the threat posed by ASCI mining machines. He once said:

“If you look at the E3 miner that was released a few days ago, the mining efficiency is not much higher than the existing GPUs on the market. My Chinese sources said that the 220 MH/s miner costs about $2,500, while the Bitmain 180 MH/s miner costs $800, which is only 2.5 times more efficient.”

Above: Relative efficiency of mining hardware equipment. Data source: https://medium.com/@ifdefelse/

In reality, while it’s difficult to know exactly what percentage of the Ethereum network is run by ASIC miners, many industry sources estimate that the number is likely very low.

For Ethereum, the "ASIC threat" is largely more of a "false proposition", mainly because ASIC miners must have long-term potential to offset the high costs of miners' early investment. Unlike GPU miners, ASIC miners are highly specialized computer devices developed specifically for a mining algorithm and cannot mine on other blockchains.

If all goes well, Ethereum will switch its Proof of Work algorithm to Proof of Stake (PoS) in the near future. For most miners, it does not seem to be a cost-effective thing to invest in large-scale Ethereum ASIC mining machines during the short Proof of Work life cycle.

GPU Mining Does Not Equal Decentralization

Some people think that GPU mining is safer. They think that using GPUs will allow "outsiders" to participate in cryptocurrency mining, making mining more decentralized and resistant to 51% attacks - well, in theory. Miners who often "stay at home" cannot afford expensive ASIC mining machines, so when advocating decentralization, GPUs seem to be a better choice.

But in fact, GPU mining is also mainly concentrated in mining pools or mining farms, rather than in the hands of independent individual business cryptocurrency enthusiasts. More importantly, there is no centralization problem in mining pools because "outsiders" cannot access ASIC mining machines, and it is precisely because of the economies of scale that miners in mining pools bring more stable income through input costs.

The centralization problem of mining pools is mainly due to the fact that certain regions can provide cheap mining electricity energy.

Above: The proportion of blocks mined by mining pools to the total mined blocks. Data source: ConsenSys Media

Upgrading to a GPU-friendly mining algorithm will not make miners choose to mine at home, nor will it make mining pools decentralized. Rather than naively hoping that decentralization can be achieved by a few people mining at home, it is better to think about how to prevent mining pools that may attack the system.

Below: The top 25 Ethereum miners ranked by the number of mined blocks. They are more likely to use ASIC miners. Data source: Etherscan.io.

Looking at ASIC Miners in a Different Way

Some people think that ASIC mining machines will reduce the security of blockchain networks, but it should be noted that this idea is wrong. The reason for this idea is that they do not take into account all the incentives. In fact, the special nature of ASIC mining machines makes it a key security component of the blockchain network.

ASIC devices have circuits specifically designed to run a single mining algorithm and are ineffective for any other computing purposes, which is very different from GPUs, which are multi-purpose and can mine on different blockchains. The investment in developing ASIC miners is a sunk cost, which means that ASIC miners are like a one-time ticket to participate in mining on a blockchain network.

Due to the higher investment cost, ASIC miners will pay more attention to blockchain security, otherwise their huge investment may not get corresponding returns. In contrast, GPU miners do not need to be loyal to a specific mining algorithm. In pursuit of profit, they can switch between mining in various blockchains, and even use their own equipment for illegal mining activities.

Additionally, second-hand GPUs can be sold for more than 50% of their original price, while the resale price of ASIC mining machines is only about 5% of their original selling price, and their price also depends on the value of a specific token.

A key factor in a blockchain’s ability to fight a 51% attack is whether the attacker has extra hardware that can accumulate computing power. In an ASIC mining chain, the amount of extra hardware is usually close to zero, while in a GPU mining chain, the amount of extra hardware is very sufficient.

Not only that, it is also very difficult to obtain enough ASIC miners to launch an attack in a short period of time, but GPU computing power and AWS GPU can be easily traded in many secondary markets. The more universal the hardware, the more available surplus there is. If the main mining equipment used by a blockchain is more "universal", it means that the security of this blockchain is relatively lower.

The problem of mining hardware manufacturing centralization

The centralization of mining hardware manufacturing is another concern of the blockchain network. Compared with ASIC chips, GPUs are more centralized at the manufacturing level. In the past two decades, the GPU manufacturing industry has been dominated by three suppliers. In contrast, the "arms race" caused by the higher profits in the mining industry has led to ASIC chip manufacturing being a very competitive industry.

In the past, although specific ASIC manufacturers may have become the main equipment manufacturers for a certain mining algorithm, they have never "dominated" the manufacturing of mining machines for all blockchains. If you want to overthrow an ASIC chip market leader, it may take a few years, and how can GPU chip giants like Nvidia, AMD, and Intel be overthrown in just a few years? Below: Nvidia graphics cards are still the first choice for PC gamers.

For mature mining algorithms, any update will cause unproven security risks, and upgrading the system will also cause a lot of trouble for miners around the world. If Ethereum adopts ProgPow, it will not actually gain a big advantage, after all, ASIC has not caused too many problems for the network.

Although the Ethereum network will soon switch to the proof-of-stake algorithm, there are still many cryptocurrencies based on proof-of-work on the market, and they will also face the question of whether to allow ASIC mining. When you don’t know how to choose, you might as well consider whether using GPU mining can really improve system security, or whether it is actually a security vulnerability.