Privacy coin Monero is in the middle of a campaign to prevent specialized mining hardware from earning all the cryptocurrency rewards on its platform.
Monero has the largest market capitalization of all the privacy coins, at approximately $1.5 billion. This is almost 3x the market capitalization of Zcash, another top player in the space.
Controlling the Flow of Coin Rewards
According to Messari, the annual mining rewards for Monero amount to approximately $62 million. ASIC operators have been able to outcompete many of the smaller miners by investing massive amounts in the technology. They are able to get a higher return on their investment by mining Monero, rather than buying it.
The goal of Monero’s leadership in trying to avoid ASIC operators from earning all the mining rewards is to avoid a centralization effect. If only a few groups of miners are able to earn all the coin rewards, then they basically control the fate of the cryptocurrency.
Until now, the band aid solution has been to run hard forks on the blockchain in order to make those ASICs obsolete. However, the issue with this is that the manufacturers have been able to keep up better than was expected. The can design and manufacture the new chips in a month, and then earn back their investment in about 6 months.
Additionally, this causes a different form of centralization. In the words of Diego Salazar, a Monero contributor:
“It may decentralize mining but it centralizes in another area. It centralizes on the developers because now there’s a lot of trust in developers to keep hard forking.”
The end goal of almost every cryptocurrency is to have it running itself, with minimal control from any party. Continual hard forks is an intervention that would lower the overall value of the Monero brand.
The RandomX Solution
A newly proposed mining algorithm called RandomX has been developed and is now in testing. It will solve the ASIC problem by not requiring application-specific computing power. Instead, it will depend on CPU power, which is far more generalized. Salazar added:
“On one end, where computers are a jack of all trades are the CPUs… On the other end, computers which does only one thing but extremely well are ASICs.”
This would fully democratize the mining of Monero, since anybody’s phone, computer, or any other device will be able to mine coins. This will hurt GPU and ASIC miners, but sticks close to the above-mentioned ideals of not being dominated by any single group.
The one risk being highlighted with this solution is that it might facilitate the hacking of computers all over the world in order to use their CPU power to mine Monero. The coin is already commonly mined illicitly, and this would open up a path for hackers to make huge amounts of money through botnets, or “crypto-jacking”, as it is called.
China Cracking Down On Cryptocurrency Miners
Just last month, China announced their goal of cutting back cryptocurrency mining, as they are now home to 2/3 of the world’s Bitcoin mining operations. It is being targeted due to the unecological nature of mining, and likely due to the capital flight aspects of cryptocurrency as well.
Mining cryptocurrency isn’t addressed as much as investing in it, but it is where a lot of big business has materialized in the sector. Aside from affecting how coins are governed, they also can have a strong effect on national economies, and it is natural to see pushback.