An incredible 80% of Monero’s computing power has almost instantly vanished after they performed an emergency hardfork to change their Proof of Work (PoW) in order to prevent asics mining.
That hardfork has now been implemented and the results are a drop from 1,030 Mh/s to around 157 Mh, before a slight recovery at the time of writing to 270 Mh/s.
The currency now appears to have returned back to the computing power it had in around November/December 2017.
It’s price then stood at around $100, before it spiked to new highs of $460. Likewise, its hashrate spiked too, but while price crashed down to now around $170, the hasharete remained the same until the PoW hardfork plunged it down by 80%.
Speculation is mounting regarding the nature of this vanished hash-rate. Some say botnet operators might have been unable to update their infected networks, or miners might have not yet upgraded.
Yet there is evidence to suggest much of this hashpower, if not all of it, was asics. That’s because the original chain apparently keeps running under the name of Monero Original. That currently has a hashrate of around 870 Mh/s, as much as has vanished from Monero.
Which is exactly what you’d expect if that forked hash-rate has not turned off. Therefore it might not really shed much light on the nature of the hashrate, so still leaving open the possibilities it could be botnets, unupgraded miners as well as asics that continue mining the old chain.
However, it is difficult to see how such botnets could have increased by 80% in two months, leaving the suggestion that asics might have come on in November/December and quickly dominated the computing power.
If that is indeed the case then it might be quite interesting to see what happens to monero’s price, if anything.
Currently, it appears to be mainly following bitcoin’s price, but with the remaining miners now being far more profitable, it is difficult to say whether there will be more sell pressure to diversify, if so whether that would be temporary, and/or whether the previous miner’s sell pressure and the remaining miner’s sell pressure remains the same.
In regards to network security, the matter is even more difficult to analyze. Bitmain’s monero asics were some 40x more efficient, and they were selling them to the public.
Considering the huge profitability, they or other manufacturers might now mine monero with asics in secret while trying to avoid detection.
This might, counterintuitively, lead to a more centralized chain as others might not be able to get their hands on asics as they would have done had there been no such fork.
Complications then arise if we consider potential attacks. China, as authoritative as it is, would nonetheless face a huge backlash if it decided to nationalize their hashpower, yet this attack vector can’t be discounted.
Which is probably why Bitmain and others sell asics to the public. They, presumably, hold at least some of the coins they mine, so they would not want to damage the network. Trying to decentralize mining by selling asics while making profits in the process might be a decent way of helping towards a healthier network.
Yet if they are forced to go underground by the threat of PoW forks, asics mining would concentrate even more and if external circumstances lead to abuse there would be little defense.
In such situations one can of course just change the PoW algorithm again, but there’s two other factors one needs to consider.
First of all, who are these miners that remain in the network and presumably are profitable with GPU gear even though difficulty increased so considerably?
They can’t be anything other than huge GPU farms, which have now become even more profitable so those farms will become even bigger and even more concentrated while the little guy will probably be more and more squeezed out.
More important is the question of security. There’s a formula somewhere, but the security of the network can be measured by estimating how much it would cost to double spend a transaction.
In monero, it is probably safe to transfer $1 million, but $10 million might be dicy, $100 million very risky, while $1 billion would most certainly be double spent.
As we have seen, the increase in monero’s network value has led to an increase in security. That performs two functions. To provide current security and to also provide room for more growth in the network’s value.
The network’s security has just dropped by 80%. That could, if we are going to very much speculate and leave detailed calculations to academics, mean that a $1 million transfer in monero might now be dicy.
If that security is not replaced, then monero’s price might not have much room for growth. However, this is the first time a major crypto has PoW forked, so we’ll have to wait and see what exactly happens, if anything.
What has already happened is a replay of the asics discussion in ethereum. Devs came out against it because they want to focus on casper, but the significant drop in monero’s hashrate is raising questions regarding whether a similar asics mining concentration might be on-going in ethereum.
If there is and it is abused, eth devs said they can get casper out pretty quickly. If it isn’t abused, then the network would be choosing between concentrated asics farms or concentrated gpu farms.
The latter, of course, are making quite a bit of noise, but the difficulty is that if already stretched dev resources are diverted towards coding a new sha3 algorithm to prevent a 2.5x gain, then hybrid casper and sharding would be further delayed.
The exact extent of that delay is naturally unknown. One could easily estimate 1-2 months, but we’d have to add another 4 to be safe as unforeseen complications might arise.
The hope however is that in around 5 months hybrid casper will be out, with PoW miners’ reward slashed to 0.6eth. Current miners, of course, would not like that at all. So if this can be delayed by another six months, moving implementation to sometime next year, then you’d think they would be very happy.
Yet eth is already moving a bit slowly, in a way. Full casper was meant to go live last year. While capacity even under current network conditions was meant to be around 10 million transactions a day, not 1.4 million.
Delays happen, that’s fine. And reality might change estimates, that’s fine too. But move fast and break things is a bit different from willingly chase distractions.
That said, we’re neither for nor against an asics fork because we don’t really think it matters either way and to us it looks like only current miners really care one way or another while the rest would rather see casper fully slash their reward.