Binance Research published their “Latest Insights & Analytics for March-May 2019” with one of the sections explaining the hard fork on Monero that happened on March 9th, 2019.
Monero (XMR) just completed its latest fork in a series of forks that are expected to starve off the increasing number of ASIC miners on the blockchain. Like every other proof of work consensus mechanism, having powerful ASIC miners as opposed to the home mining equipment (such as CPUs and GPUs) causes a centralized network of miners. The expensive costs associated with the ASIC mining equipment and the high hash rates produced from the mining devices cause the mining process to be centralized across a few miners with deep pockets.
“The Cat And Mouse Game”
The centralization effect caused by ASIC miners has long been a problem affecting the PoW consensus mechanism in Monero and the community is strongly working towards getting rid of these miners. However, the solution is not straightforward. This is the third time that Monero is carrying out a hard fork to provide increased ASIC resistance. Previous Monero forks did not have a long-lasting impact on the resistance as ASIC mining developers always reinvent their game to mine XMR.
However, according to the latest report by Binance on the latest fork by Monero, the complete kick out of ASIC miners from mining may end up having undesired consequences on the blockchain.
The Expected Fall in Mining Hash Rate
The report from Binance writes that the lockout of ASIC miners caused a drop in the miner participation in mining XMR blocks which in turn causes a lower hash rate. The lower hash rate (drop in mining difficulty) has however provided an increase in the miners’ profitability citing lower costs of mining. On the subject of longer block processing times, the report writes,
1XMR all-time hash rate chart (Source: Bit Info Charts)
“As a consequence, fewer miners were competing for blocks with pre-fork difficulty levels that assumed higher network aggregate hash rates, leading to longer block times. It took roughly 36 hours for the average block-time to return to the normal average of two minutes per block. Unsurprisingly, the fork from April 2018 also led to a similar scenario (as illustrated by the first spike in the chart above to just under 10 minutes per block).”
Household miners (GPU/CPU miners) continue to make profits at the moment given the low hash rates available and the low participation of ASIC mad automated mining rigs currently. However, the profits will not be running for long as ASIC miners are expected to take up the market once again despite the recent fork.
Complemented by the rising cryptocurrency market, miners will be motivated to take up ASIC miners once more. For any algorithm that can be mined, remember an ASIC miner can also be created for it. The automated mining rigs are expected to pop up in the near future and Binance is sure that will happen as they announced Monero will be having another hard fork on the chain this October.
Is Monero At Danger of A 51% Attack?
Following the low hash rates on the platform, the report from Binance worries the chain is at risk of witnessing a 51% attack on the chain. As the ASIC miners were pushed out, the hash rate dropped by over 70% raising the probability of 51% attack greatly. However, it is currently more profitable to mine on the chain than attempting to take over control of the chain which fends off the hackers.
“ASIC resistance hard forks is a trade-off game between staving off centralization and boosting mining participation rate.”
In conclusion, the ASIC resistance hard forks, whether contentious or non-contentious opens up a case for more development on the Monero blockchain due to their need to continually update their algorithm. However, no conclusive report has been filed on the trade-off benefits of locking out ASIC miners from mining.