The discussion about blockchain technology heats up as the focus on cryptocurrencies wanes. With the cryptocurrency hype out of the way, the distinction between cryptocoins and their underlying blockchain technology becomes common knowledge, and there is where investors see the future now.
The core themes of safety, scamming potential and the resulting need for governmental regulation (about which this excellent article series deserves mention) now go beyond the cryptocoins environment to encompass the whole blockchain concept. This time our jargon series will focus on the security aspect from the point of view of how hardware influences this technology: Quantum Resistance and ASICs.
51% prepared for the future: Quantum Resistance
One of the greatest fears surrounding blockchain technology lies on the power of quantum computers. These upcoming super machines will have an exponentially higher computing power than any of today’s computers and should therefore be able to decipher current blockchains’ proof of work hashes easily.
To use a funny comment from John Oliver’s Last Week Tonight, these computers will “take the chicken nuggets [a single block] and turn them back into a chicken [the whole chain]”. This means that with a quantum computer one can manipulate the reality of the blockchain as she or he wishes by staging a 51% attack on the chain, i.e., they would be able to define the truth of more than half the blocks and thus convince the whole chain that this new truth is the one that counts.
According to Dilbert’s cartoonist Scott Adams, humanity is capable of dealing with any slow-coming disaster. This seems to be the case with blockchains as well: a number of coins try to pass themselves as Quantum Resistant, i.e., as having protocols strong enough to handle even these marvellous machines. Some critics believe though that quantum computing has still a long way to go before becoming a real threat, and that by the time this happens blockchain technology will have advanced a lot itself, proving Scott Adam’s theory.
ASICs: a blockchain miner’s first trade-off analysis
Quantum computers may be a future reality, but ASICs, the acronym for Application-specific Integrated Circuits is a current reality. ASICs are hardware pieces specifically engineered to optimally solve a specific blockchain’s proof of work algorithms. Most ASIC are tied to one blockchain code and can solve its parameters at astounding speeds and with less power consumption than a traditional, generalist mining hardware.
There is a catch: once a blockchain code evolves, so must this hardware be exchanged for state-of-the-art one, the former ASIC being obsolete at the instant the chain gets different. Therefore miners have to constantly evaluate whether their investment in ASIC hardwares now will pay themselves in the upcoming future before they have to exchange them. The market for ASICs is a now a bigger part of the blockchain technology market itself and is expected to only expand as new, faster circuits get developed. And it is not as if mining will stop growing any soon either.
One other important aspect of ASICs is their indirect participation in the philosophical discussion about central vs. decentral blockchains. Although blockchains are described as being decentralized per se, the very existence of ASICs put a big question mark to that, because in theory a powerful enough ASIC powered miner could be also capable of handling a 51% attack. Also, given that ASIC powered miners produce more than their counterparts, they tend to accumulate more mining power and thus blockchain creation participation in the long run, thus centralizing activities to an extent. These arguments are usually countered with the miner ever lowering wins over time, as chains pay less and less per block produced in most common applications, but this is a discussion for our next post. Meanwhile, an appropriate cartoon to the themes above.
Here the link to the first part: Block Chain Jargon (I).