Naturally, these specialized farms with massive hash power have begun to undermine the decentralization principle of cryptocurrencies. For example, a power outage at one of the mining farms in China caused a sudden drop in Bitcoin's (BTC) network and a sharp decline in its price.
These reasons have led to the emergence of ASIC-resistant cryptocurrencies, which are resistant to application-specific integrated circuits (ASICs) designed specifically for mining. Since the algorithms used by protocols do not provide fair advantages to GPU mining, technically, cryptocurrency mining can be done on ASIC-resistant cryptocurrencies. However, this situation is not financially feasible. ASIC-resistant cryptocurrencies provide a fair distribution to participants in the network by using ordinary computers, as no one can mine above a certain hash power. This ensures a balanced distribution, while also preserving the decentralization of the blockchain network.
Which Cryptocurrencies Are ASIC Resistant?
Application-specific integrated circuits (ASICs) also have specific applications in fields such as medicine, satellite sectors, research and development, and many others. In the world of cryptocurrencies, the term "ASIC Resistance" is used to describe cryptocurrencies that are relatively less sensitive to mining activities carried out by ASIC miners.
Therefore, miners are less incentivized to use ASICs to acquire a particular cryptocurrency. The concept of ASIC resistance is derived from this event.
Examples of ASIC-resistant cryptocurrencies include:
Ethereum is one of the cryptocurrencies designed to discourage ASIC mining. Although some miners may attempt to use ASICs for mining on the Ethereum network, they achieve inefficient results in terms of both time and cost.
Another popular blockchain network among miners is Monero. It prefers the RandomX hash function to create new cryptocurrencies within the different CryptoNight protocols. Due to the relative ease of mining, this blockchain network does not require any specialized hardware.
Safex Cash (SFX)
SFX is a cryptocurrency that uses the RandomSFX mining algorithm, making it ASIC-resistant by design.
Due to recent changes in its algorithm, miners must use the power of GPUs for cryptocurrency mining.
Haven Protocol (XHV)
Haven Protocol uses the RandomX algorithm and is ASIC-resistant.
Ethereum Classic (ETC)
Ethereum Classic is also an ASIC-resistant cryptocurrency.
What are the Preventive Mechanisms of ASIC-Resistant Cryptocurrencies?
ASIC-resistant cryptocurrencies include protocols and algorithms that prevent or make it difficult to fully leverage the mining capabilities of any ASIC hardware.
Essentially, the power of an ASIC machine lies in the numerous parallel and sequential threads it creates within the chips. A significant amount of physical space is required on the chip. If the algorithms do not provide that space, ASIC hardware cannot accelerate the processes.
In certain cases, the results obtained from mining an ASIC-resistant cryptocurrency through ASICs can be much less efficient than those achieved through ordinary CPU mining.
Regardless of the algorithm type, it should be noted that modifications can be made to enable the mining of various types of cryptocurrencies using ASIC hardware. Similarly, changes in algorithms can also make mining with ASIC hardware more difficult or prevent it altogether. Nevertheless, when there is no ASIC hardware available or when such hardware is ineffective for mining a particular cryptocurrency, it can be said that the cryptocurrency is ASIC-resistant.
How Does ASIC Resistance Impact Decentralization?
The development of ASIC-resistant cryptocurrencies is among the priorities of crypto developers. The philosophy of decentralization in cryptocurrencies must be sustainable by nature; otherwise, cryptocurrencies would lose their most important feature. The critical point in achieving this is the use of ASIC-resistant cryptocurrencies. By doing so, ASIC-resistant cryptocurrencies help to mitigate the impact of cryptocurrencies that undermine decentralization in the market to some extent.
The proliferation of ASIC-resistant cryptocurrencies and the adoption of this approach by other assets contribute to preserving the philosophy of the sector and ensuring a fair distribution of cryptocurrencies. Therefore, ASIC resistance holds a significant position in the crypto ecosystem.