Mining cartels' are real and are a problem

This is something that I think does not get enough coverage, but hopefully, this will change with my post and others like it. But ultimately it comes down to you. You need to help spread the awareness of this problem. Especially if you are into crypto mining.

What are mining cartels?

I assume that if you are not aware of them the very word "cartel" might have gotten your attention. Given the whole drug cartel thing, and whatever ells cartels there are out there. This however is not one of those violent cartels, but this is more of the traditional type of cartels. By that I mean this type of cartel: A cartel is "a group of independent companies which join together to fix prices, to limit production or to share markets or customers between them". And this is something that is probably more occurring than you think. But as it is not widely outspread among every cryptocurrency the majority of people that are in the crypto sphere probably are not aware of them or have had no contact with any crypto being affected by them.

But just like many other bad actors in our society, they thrive in the unknown. And the less light that gets shined their way the better they think it is. That means they can go about business as usual. But hopefully, we can together change that. By increasing the awareness of the problem, that way we can make it harder for them to find places to operate.

What is the problem?

One of the more recent problems I was made aware of is the PoW coin Decred. They were more or less taken over by one or more of these cartels. They utilize a load of ASICs or FPGAs to provide the majority of the hash power of the mining. This in turn means they will get the majority of the rewards. And given enough time, or a fairly short amount of time depending on how new the blockchain is. This will compound when time gets added to the mic, resulting in them controlling the majority of the coins. This in turn will allow them to act as market makers. Freely manipulating the price of the coin as they see fit.

This is what happened over at Decred as well. This got so bad that proposals were put forth and enacted to try and combat the issue. Sadly this proposal had a big flaw. And as my readers are some of the smartest online, way more so than me at least. And that's the measuring stick I use for most things. I bet you have seen this a mile away. Shifting the PoW rewards over to proof of stake (PoS) when the people you are trying to stop already control a big bulk of the coins. This just means that they stop the mining and spin up a bunch of nodes instead. The whole thing results in a big status quo. And I am not talking about one of the greatest British rock groups of the last decades. But the literal meaning, no change. The cartel still receives the majority of the new coins. Only this time it is from staking instead of mining.

As seen in this proposal there is no sugarcoating the problem, but in fact, they are calling a spade a spade. And here the plan was to switch to the BLAKE3 algorithm in order to stop the ASICs from being able to mine the network. This is however looking like a temporary fix at best. This is simply because of the fact that FPGAs are able to mine BLAKE3. And the majority of those puppies are controlled by a couple of large FPGA farms. More or less the same thing as a mining cartel. But at least FPGAs have become more readily available over time, and there are new machines just entering the market. So hopefully it will become less of a "club" and more readily available to the masses.

The goal with the shift to BLAKE3 is to get rid of the ASICs and instead promote GPUs as the way to mine the coin moving forward. And by doing to, hopefully, eliminate or at least stop the mining cartel.

An FPGA capable of mining 17 different algorithms

The easiest was to explain what FPGAs are, for those unfamiliar like me. Is that they are similar to ASICs but instead of being limited to mining one algorithm these can mine a whole slew of different algorithms. As an example, while researching this post one of the FPGAs I looked up where able to mine 17 different algorithms. And yes I am aware that this is an extreme oversimplification of things and technically not correct. But for the purpose of this post, it will do.

What is the problem?

There are a few problems with how things are currently in the crypto world. And I am not talking about the obvious one where people can get screwed by someone market manipulating. I have mentioned that several times, and fairly recently as well. But unlike during the last bull run where most new minable coins were GPU focused. The clear majority of new coins today are more or less ASIC-ready from day one. Embracing that part.

This leads to the second problem. ASICs are generally very expensive. Even if they currently are cheaper than they are during a bull run. It is still a significant investment. If we compare this to a GPU, this is something that already is included in every computer. Sure not all GPUs are created equal. But you can normally use what you have. Not talking about you already having it. But you can get decent GPUs for a lot cheaper than you can get an ASIC. Not to mention that there normally are bottlenecks regarding the production of ASICs. As there usually are one or maybe two companies that are producing an ASIC for the coin you might be interested in.

With coin embracing ASICs from the start, and given the pricepoint of ASICs this is the perfect storm for having your next shiny crypto be extremely centralized. And a prime target for a mining cartel. But even if they do to attack it still means that very few people will be providing the majority of the hashing power. Unlike with GPUs where a lot more people are taking part. This means that the coins will be shared among more people, thus the cryptocurrency will become more decentralized. And way less prone for market makers to target it. And other nefarious crap.

And I would like to end by of course iterating that I have nothing against Decred, in fact, I have not even looked into the coin at all other than checking out the proposals. A link to the project's GitHub can be found below. So this is not done to point a finger at them. It is just the most recent example of the problem. And that is why I used them as an example. In fact, taking action to try and combat the problem is most likely one of the better things you can see. So, by all means, check the project out, it might be a good one, I know I will take a look given the time. Hopefully, you will also help with shining a light on this problem regarding mining cartels.

The last thing I would like to ask is if you knew about this problem before reading about it here. And if you have come across it anywhere, if so where? And have you any idea of how or what to do to combat the problem? Pleas type away in the comment section, I am looking forward to reading your comments.

If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead.

https://medium.com/@bo.daniel.jensen

See you on the interwebs!

Picture provided by: https://www.pexels.com/, https://fpgaminer.eu/

Resources

1. https://github.com/decred