Application-Specific Integrated Circuit (ASIC)

Intermediate

Community Submission - Author: John Ma

As the name suggests, ASICs are integrated circuits that have been designed to serve a particular use case, in contrast to the general-purpose circuits, such as the CPUs that power our computers and mobile devices.

In some circumstances, there are simple computing tasks that don’t require the financial and computational overhead that a general-purpose CPU would bring to the table. Instead, an ASIC can be used as a much simpler and efficient alternative (both in terms of cost and energy).

In the world of cryptocurrencies, the term ASIC is widely used to refer to the specialized hardware that are being developed and regularly improved by companies such as Bitmain and Halong Mining. These hardware are designed with the sole intention of mining Bitcoin (or other cryptocurrencies). There are some coins that cannot be effectively mined using ASIC miners and, as such, may be referred to as ASIC-resistant cryptocurrencies.

In short, mining is a process that consists of performing a myriad of hashing functions until a valid hash output is produced. The miner that finds a valid hash uses it as proof for their work, which grants them the right to validate the next block of transactions and collect the block reward.

Although ASICs can be highly efficient, being restricted to a particular use case makes them completely useless for doing anything else. Moreover, the continuous technological advances in the cryptocurrency space bring new ASIC models that quickly render older designs completely unprofitable.

There is also a strong debate in regards to the centralization of mining power caused by ASICs. On the one hand, they provide the much-needed hashpower for securing and verifying blockchains, but they also centralize the power of mining into the hands of a few mining companies who can afford to buy thousands of ASICs to set up and run large mining farms and mining pools.

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