If you are familiar at all with the field of cryptocurrencies, you’re well aware of Ethereum, the second largest blockchain-based currency behind Bitcoin. With a market cap at the time of this writing of $73.7 billion, Ethereum is a powerhouse in the world of digital currencies.
With such immense value at stake, it would be expected that major players are battling for control of Ethereum’s future direction.
On one side you have Vitalik Buterin, Ethereum’s founder, and a vast army of rabid followers who want to keep Ethereum mining in the hands of small players. On the other side, you have Bitmain, the world’s number one producer of specialized mining computers.
Bitmain is set to release their first ASIC, or application-specific integrated circuit-based computer for sale in the next 60 to 90 days. Being far more powerful than a PC, the worry is that larger corporations could buy large numbers of Ethereum ASICs and consolidate power of the Ethereum network into the hands of the few:
What’s at stake is domination of the process known as mining, where scores of computers solve complex mathematical riddles to win newly minted coins in exchange for processing the transactions that allow the network function.
Ethereum developers have always wanted the project to be “a world computer,” in which millions of people’s PCs and graphics card-based machines run the digital ledger. Such a wide web of participants “gives Ethereum extreme levels of fault tolerance, ensures zero downtime, and makes data stored on the blockchain forever unchangeable and censorship-resistant,” according to Ethereum’s documents.
The range of participants could be about to shrink, as Bitmain and others move in with a new type of computing hardware that could give them disproportionate power when it comes to confirming transactions. The new hardware, which should become available in July or sooner, could push out smaller miners and is “a nightmare for decentralization,” said Lucas Nuzzi, a senior analyst at Digital Asset Research.
Ethereum developers are rushing to stop the invasion. During a call last month, Ethereum co-founder Vitalik Buterin said that the risk will go away once the community deploys Casper — software that will get rid of miners altogether and confirm transactions in a different way, which would expand the number of people involved in the process. But the date of Casper’s deployment is uncertain, with the project having already been delayed for months.
ASIC, or application-specific integrated circuit-based computers, are more efficient than traditional PCs, phones or graphics cards in running specific algorithms used in confirming transactions — so they can earn tokens more cheaply and faster. They have long been used to mine Bitcoin. Later, they spread into Litecoin and Dash. Bitmain announced the first-ever ASIC computer able to mine Zcash in May, and an ASIC miner for Ether last month.
“That could have a negative impact on the Ethereum community and therefore on Ethereum price,” said Sam Doctor, managing director at Fundstrat Global Advisors who holds some Ether. The coin “may underperform the space,” though that may be short-lived, he said.
The greater mining power could let Bitmain — or other large miners that buys its gear — to gain control over the network in what is known as a 51-percent attack, in which they could falsify transactions and make away with other users’ coins.