Earlier mining was a profitable enterprise business using CPUs and GPUs only. However, using dedicated mining machines is mandatory to reap profit even after joining a cryptocurrency mining pool. However, when you use a dedicated mining machine for this purpose, you cannot use them for any task. Check out the technical definition of bitcoin mining if you’re interested in bitcoin trading.
But in the case of GPU, you can use them for mining and other digital rendering tasks like graphic designing, VFX, and hardcore gaming. Earlier, people considered ASICs a gold mine, but now they have started to realize that these dedicated mining machines are the only reason mining is not decentralized.
So far, the virtual currency mining industry is equipped with no full-proof solutions to the centralization of digital currency mining. If the centralization of the digital coin community continues to grow, the mining ecosystem will confront a profound impact in terms of credibility, authenticity, and profitability. The reasons why growing centralization in the virtual currency mining industry is hazardous for the future of mining and digital currency networks.
Key Takeaways!
Application-specific integrated circuits merely entered the mining industry as a dedicated mining machine but now have disturbed the mining ecosystem for many digital currencies.
Application-specific integrated circuits might have a use case in aerospace engineering, but this hardware became famous when it came into the mining industry.
When it comes to general hardware used in computers like CPU and GPU, they used to produce a decent hash rate. Still, after the release of cryptocurrency dedicated mining hardware, the hash rate of this hardware has declined immensely.
As per reports subsequent entrance of a few ASICs in the mining industry, mining BTC became extremely unprofitable with the help of a graphic processing unit.
Applications-specific integrated circuits might be the most famous dedicated mining machines, but the space of manufacturers of this mining hardware is restricted to a few companies. Bitmain is the most famous mining hardware manufacturer and the parent company of some famous mining pools.
Since mining hardware manufacturing companies are very short in number, the concept of centralization in the mining industry is increasing rapidly.
Undeniably, there are no harsh impacts of centralization in the virtual currency mining industry, but it will be accused of declining the credibility of this business in the future. Moreover, it can correspondingly exert a massive impact on the profitability of this business.
Less ASIC manufacturers!
The number of application-specific integrated circuit manufacturers is not considerable. There are merely a few companies with neck-to-neck competition in revenue and manufacturing sales units. In contrast, other companies are not even in the race. Since ASICs are the utmost utilized mining machine, these mining manufacturers are also responsible for making mining centralized.
Bitmain Prominence!
As discussed above, Bitmain is currently one of the famous ASIC manufacturers. Bitmain successfully dominates the mining industry every year because it also owns two popular digital currency mining pools.
Moreover, Bitmain recently went public, and many people have bought the stocks of this company. As Bitmain continues to profit, its stock prices will go up. Bitmain’s current valuation is nearly $70 billion. Even if cryptocurrency mining’s profitability decreases, Bitmain will still generate a significant profit by just selling mining devices.
Bitmain does not only manufacture devices specialized for bitcoin mining, but they have attempted to disturb the ecosystem of other cryptocurrencies in terms of mining. For example, Bitmain correspondingly released a mining device for ethereum mining, but ASICs could not disrupt the ecosystem of ether mining because ethereum already had an ASIC resistance mechanism.
In ether mining, GPUs are still carrying considerable profitability, and the majority of the ether miners have installed GPUs in their mining rigs. Bitmain prominence can correspondingly lead to a 51% attack upon cryptocurrency networks like bitcoin, as the company owns a significant hash rate on the BTC network.
The above-listed portion explains how centralization can cause more significant problems in the mining industry.