Why It’s Important That Monero Rejects Compatibility With Bitmain’s New Antminer

Niklas Göke
Disclaimer: This is not financial advice. I am not a financial advisor. What follows is my personal, subjective, biased opinion.

The News

Bitmain, one of the largest cryptocurrency mining equipment manufacturers located in Beijing, announced the release of their latest mining gear on 15th of March, 2018. Coming in four batches, the Antminer X3 costs $12,000, $7,600, $3,000 or $1,900, depending on when customers want to have it shipped: May, June, or thereafter.

Upon release, the company received instant criticism from the community at large for selling a ‘useless miner.’ The cryptographic algorithm it is designed for, CryptoNight, is mainly used by coins focused on privacy. Monero, the most widely used privacy coin based on CryptoNight, has already proclaimed it will tweak its technology to avoid being minable via the Antminer X3, hence the debate.

The Facts

Bitmain doesn’t just manufacture mining equipment, they also use it to run Antpool, the second largest Bitcoin mining operation worldwide. As such, the technology Bitmain develops is called ASIC, short for application-specific integrated circuit. This means their different mining devices are designed to specifically cater to one algorithm in the most efficient way.

In case of the Antminer X3, it’s the CryptoNight algorithm, which is used to mine several coins currently among the top 100 by market cap: Bytecoin, Electroneum, and Monero. The first batch of the Antminer X3 will ship from 15th to 31st of May. At a power consumption of 550W and a hash rate of 220KH/s, miners could profit over $4,000/month running it to mine Monero.

However, back in February, Monero announced it would take several measures to ensure its mining algorithm stays resistant to ASIC devices:

“In sum, we strongly believe that it’s beneficial to preserve our ASIC resistance. Therefore, we will perform an emergency hard fork to curb any potential threat from ASICs if needed. Furthermore, in order to maintain its goal of decentralization and to provide a deterrent for ASIC development and to protect against unknown or undetectable ASIC development, the Monero team proposes modifying the Cryptonight PoW hash every scheduled fork, twice a year.”

Bitmain acknowledged this statement indirectly on their Antminer sales page and also included a disclaimer that no requests for refunds will be accepted.

“2. There are financial risks associated with mining cryptocurrencies. These risks can be related to changes in exchange rate of the cryptocurrency or to changes in the algorithm that is used to mine the cryptocurrency. Please deliberate well before making a purchase because we will not accept any requests for refund for orders of this batch.

3. One major cryptocurrency which is using CryptoNight hash function is about to change their PoW algothrim, and according to their public statement, it is purposely to brick ASIC mining rigs including X3. When you buying it, you are betting that they are wrong.”

The Commentary

There are several speculative angles one could take to make sense of the situation. A user on Reddit suggested that these machines are what Bitmain used to mine Monero and now wants to sell to unaware miners, knowing Monero will next update (= fork) its blockchain in late March. Some evidence for this was posted by a Twitter user, who shared a certificate for the Antminer’s technology that was signed January 23rd.

Another is that Bitmain might expect Monero to not be able to tweak the currency enough to resist the miner’s ASIC capabilities.

Whether you think Bitmain’s business practices are shady or not, what’s important to understand is why Monero aims to resist ASIC technology in the first place: to keep cryptocurrencies decentralized.

Since only a few companies have the power to design ASIC miners, mining rewards would quickly centralize around those companies and the people being able to afford their products, the team said. Proof of this already happening is Bitmain’s 2017 revenue eclipsing that of Nvidia, a GPU manufacturer that has been around for 24 years.

“This creates a single point of failure. For instance, a government could require these ASIC manufacturers to add a “kill-switch” which allows them to shut down a miner remotely or otherwise control it. This threat has the potential to destroy the whole network.”

Such a kill switch has already been found previously in one of Bitmain’s miners. Alternatively, governments could enforce licenses or single out certain transactions, thus defeating what Bitcoin and other currencies were originally designed for: free, anonymous, definitive peer-to-peer financial transactions.

Even at the bleeding edge of technology, sometimes, resisting new developments is a good thing.

Keep it crypto,

The Crypto Times

The latest crypto news, deeply researched, fact-checked, and thoroughly analyzed.

Niklas Göke

Written by

I write for dreamers, doers, and unbroken optimists. I also publish daily micro-blogs to help you live a balanced life: https://emptyyourcup.substack.com

The Crypto Times

The latest crypto news, deeply researched, fact-checked, and thoroughly analyzed.