On Monday (October 1, 2018), David Vorick, the CEO & Cofounder of Siacoin, announced in a blog post that Siacoin will be hard-forking away from the current chain in order to brick the current ASICs (Application-Specific Integrated Circuits) mining on-chain.
ASICs are specialized mining hardware, specifically designed to mine one algorithm. They offer increased performance, efficiency, and profitability, but these benefits come at a cost.
ASICs cost somewhere between six to eight million dollars to develop. Due to this barrier to entry, ASIC manufacturing quickly becomes centralized around the companies that can afford to develop the hardware.
Siacoin (Ticker Name: $SC) has been discussing this hard fork for a long time, and now it seems to be finally happening. Since January 2018, mining giant Bitmain and Innosilicon have been selling Siacoin miners, while the subject has been a contentious topic of debate throughout the SC community.
As seen in the chart below, the introduction of ASICs to the network led to exponential growth to Siacoin’s hashrate. Although this increased hashrate means more security, that security comes at the cost of centralization.
According to Siacoin’s reports, Innosilicon is the dominant SC miner. With their unique 14nm chip, it’s believed that they control 37.5% of the hashrate.
Throughout its history, Siacoin has always been in favor of ASICs, with one caveat. The Siacoin team has explicitly showed how ASIC manufacturing centralization leads to abusive behavior.
For example, when Bitmain announced their Siacoin miner, they only gave a ten-day window between announcement and shipping. This meant that any GPU miners on the network only had 10 days before they were squeezed out of the network.
In addition, some have suspected that Bitmain has in fact been mining Siacoin secretly for months.
David Vorick warns that for mining companies, mining with their own mining apparatus is counter-productive: it centralizes the hashrate and changes the incentive structure. If one entity owns the majority of the hashrate, there’s no reason for them to sell ASICs to their competition, as their own profits would dwindle.
ASIC manufacturers are therefore incentivized to NOT sell their ASICs, as releasing them to the market would increase mining competition and lower profitability.
David explains that since mining smaller cryptocurrencies is less profitable than mining larger cryptocurrencies, there isn’t much incentive for ASIC manufacturers to design new miners.
To illustrate this, take a look at Bitcoin. There are currently more than 20 BTC ASIC manufacturers on the market. Meanwhile, SC only has three. This diversity of manufacturers minimizes BTC miner centralization.
The fork date has not been announced yet. Once the hard fork occurs, the hash rate will temporarily drop, and a minority chain (that still supports Bitmain ASICs) will continue, probably under the name Siacoin Classic.
Not The First Anti-ASIC Hard Fork
Siacoin is the second major cryptocurrency to fork away from ASICs. Earlier this year, the Monero community made a similar decision. They decided that the current ASICs were abusing the network, and agreed to change the proof of work algorithm to favor GPU miners.
After Monero hard-forked away from ASICs, the now-useless Monero ASICs were put on fire sale. Baikal Mining offered XMR Miners with a “buy one get four free” discount.
Looking at the chart below, you can see that Monero’s hashrate plummeted after its anti-ASIC hard fork. Something similar could happen to Siacoin when they hard fork.
Read more: Monero’s Hashrate Drops Over 80% After ASIC-Resisting Hard Fork
Trading Siacoin
Siacoin (SC) is currently trading at 99 satoshis (0.00000099 BTC), down 87% from the all-time high of 744 satoshis (0.00000744 BTC). Siacoin is available on Binance and Poloniex.
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