Goliath is about to take on David, and this time it won’t be pretty for David.

That’s the sentiment of of cryptocurrency industry players who expect Bitmain to begin selling Ethereum application-specific integrated circuit (ASIC) mining equipment.

A stock analyst at Susquehanna this week released a research note saying that during travels in Asia he confirmed Bitmain had developed the devices and plans to begin shipping them in the second quarter of this year, CNBC reports. This specialized equipment spells trouble for AMD and Nvidia, makers of the graphics processing unit (GPU) chips used by miners to make new coins, the note says.

It also spells trouble for people who rely on GPU technology to mine ether (ETH), say cryptocurrency players.

“Once that ASIC comes online, it will destroy the profitability for GPU mining,” Dev Horn, CEO of Ether Mining Company tells ThirtyK. “Smaller miners will shut off their machines because it won’t be profitable for them to mine ethereum any more. It will crush the mom-and-pops.”

Bitmain’s Ethereum miner tentatively will be named Antminer F3, according to one Chinese technology news website. (The company already uses the Antminer moniker for other equipment.) Horn says ASICs are much more powerful than GPUs and estimates that a mining device containing the former would have roughly three to five times the power of a device containing the same number of GPUs.

“It’s like having your stomach punched twice,” Horn says. “First, the price has dropped on ether, and now with the ASICs, GPU mining will become even less profitable.”

As a result, ASIC machines stand a far greater chance of successfully solving the calculations needed to unlock a block.

That stronger processing power will make mining more difficult for GPU miners, Horn warns. ASIC machines have the capability to run through calculations at a faster rate than GPUs and solve more blocks at a faster clip, so the ether algorithms will increase the degree of difficulty exponentially for all ether miners attempting to unlock blocks.

“It’s like having your stomach punched twice,” Horn says. “First, the price has dropped on ether, and now with the ASICs, GPU mining will become even less profitable.” Ether’s price has plummeted to about $413 after reaching an all-time high of more than $1,200 in January.

The Broader Impact of ASICs

Cryptocurrency players say they are concerned ASICs will transform the industry, because their high cost will make mining viable for only a small number of participants, including large companies and wealthy individuals. That could give these participants the potential to control a currency.

“If two or three mining pools have more than 51% of the combined hash power, they can decide which ether blocks get mined and which ones don’t,” Horn says. “The guys who created bitcoin (BTC) never envisioned GPUs being used to mine it or ASICs. They thought it would be democratized and everyone would mine it just using their computers. But now the only way to mine for bitcoin is to have an ASIC, and the power is consolidated around it.”

Monero (XMR) developers are concerned about ASICs, too. Monero is planning a proof of Work (PoW) change in an April 6 release, Lithium Luna, aimed at keeping ASICs at bay, reports BTCmanager.com. Bitmain, in a tweet, said it would ship its Antminer X3, which can be used to mine monero, beginning in May.

In a February post, the monero development team stated that it intends to deliver swift resistance to ASIC and will consider modifying the proof of work at every hard fork to achieve this. “ASIC will obtain a significant majority of the network hash rate and introduce centralization,” the Monero blog post said, adding that the team wants the cryptocurrency to have an egalitarian mining network and foster decentralization.

The ethereum development team has expressed opposition to the idea of ASIC mining in the past, but Ethereum was not immediately available for comment on the expected Bitmain Ethererum ASIC equipment.

Says Horn, “The little guys can’t make money any more, only the big guys can.”

 

 

Dawn Kawamoto
Dawn Kawamoto is an award-winning technology and business journalist, whose work has appeared in CNET's News.com, Dark Reading, TheStreet.com, AOL's DailyFinance, and The Motley Fool. She has also covered the technology jobs and careers market for Dice.com.