Whilst the price of almost all cryptocurrencies has plunged in the past three months, the global hashrate (or mining activity) remains high. But why? There’s a theory maybe ASIC miners or botnets are behind this unusual trend.

It wouldn’t make sense to mine a cryptocurrency at a loss, you may as well go and buy at an exchange. It only makes sense to mine when things are profitable, as with any business operation. We see the same with natural resources like oil and gas. As prices go up people are willing to go to greater lengths to get resources out of the ground but when prices go down, those boomtowns in North Dakota go to dust.
Cryptomining, based on economic laws, shouldn’t be any different. So how much of this interest is due to botnets or is there something else at play here?
There are two theories as to why the global hashrate is not dropping. Firstly, the majority of Monero mining is from botnets (aka Cryptojacking). In this case, miners don’t worry about profitability. Every mine is profit to them no matter how much Monero they generate. Second, an ASIC miner has been developed against the cryptonight protocol and this is being used to mine.

The Monero team planned to change proof of work (PoW) algorithm on the block #1546000. The change in PoW will be implemented on April 6th, 2018. To combat both of these possibilities. Let’s look at them in more detail.

What is Cryptojacking?

Cryptojacking is a way to mine for cryptocurrency using the computing power of a victim’s device, generally without their permission. While it doesn’t infect the device or exfiltrate data like more severe mobile threats, it has been considered a threat by experts in the IT security industry because it is still stealing processing power and as a result, draining the battery of the device which is highly inconvenient and for some employers, dangerous. It has grown from an obscure service into a threat that persists across any device – be it mobile or desktop, iOS or Android.

What are ASIC miners?

Historically, miners used their central processing unit (CPU) to mine, but soon this wasn’t fast enough and it bogged down the system resources of the host computer. Miners quickly moved on to using the graphical processing unit (GPU) in computer graphics cards because they were able to hash data up to 100 times faster and consume much less power. Then there were field-programmable gate array (FPGA) processors which attached to computers using a USB connection. They used much less power than CPUs or GPUs and gave birth to concentrated mining farms.
Today, application-specific integrated circuit (ASIC) is the current ‘top of the line’ technology used in Bitcoin mining. These ASIC machines mine at unprecedented speeds while consuming much less power than FPGA or GPU mining rigs. They have been used for a number of years in Bitcoin and contribute to the vast majority of the global hashrate.
Cryptonight was specifically designed to be ASIC-resistant but Bitmain released ASIC miners for orders in early March 2018.
The working theory is that Bitmain developed ASIC miners sometime in the past 6 months and has been using them for its own gain until it ships the products.

Why the fork?

Monero is the most popular Cryptonight coin by global hashrate and also market capitalization from both Bitcoin and USD. Monero’s protocol aims to provide a new block every two minutes. If more miners are working with Monero, the difficulty level will go up as the global hash rate increases.
The hashrate is the speed at which a computer is completing an operation of cryptocurrency mining. Looking at the global hashrate is an indication of how much activity there is in mining for a specific currency and it’s a good indication of how profitable a cryptocurrency is at a given time.

Any cryptocurrency has in its specification how often it wants a block to be found. Based on how quickly previous blocks are found. If they are found too frequently the algorithm needs to be adjusted. If blocks are being found too quickly it can lead to inflation, like we’ve seen with Bitcoin.
In summary, the purpose of the new algorithm is to defeat both ASIC miners and cryptojacking so after tomorrow we should see a a drop in the hashrate to reflect the lower value in the cryptocurrency.
Read more about Cryptojacking here.
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