WhiteSites Blog
WhiteSites Blog
Recently there have been numerous articles about quantum computers cracking the underlying algorithm behind bitcoin. SHA-256. Bitcoin's developers could handle this in several ways, but there is one thing that the world is over looking completely.
Even though SHA-256 is a simple enough algorithm that old CPUs and GPUs can take part in mining it. Its only profitable if you A. use the latest ASIC miner hardware, and B have really cheap electricity. These days most bitcoin mining happens is large farms with thousands of ASIC miners, and Megawatts of power.
First you need to understand what an ASIC miner is. An ASIC miner is an Application Specific Integrated Circuit. Think of an Intel or AMD CPU. Its a piece of silicon that has the required logic gates ( transistors ) edged with Ultraviolet light onto a slab of pure silicon. Now a CPU will have various logical components built into its design. All the L1, L2, L3 cache, Registers, instruction sets, cores, ect... are permanently etched.
Think of a CPU like a Home Depot Store. It has several of each kind of tool you would ever need to complete your project. But Bitcoin mining is a task that requires just a hammer. An ASIC chip is like a home depot store with 10 billion hammers, instead of 100 hammers. Plus an ASIC chip can swing all 10 billion of those hammers at the same time. This is why ASIC chips are so much faster than CPUs or GPUs. They are designed specifically for one task, in bitcoin's case SHA-256. ASIC miners made for SHA-256 are pretty much only good for 1 thing. hashing data for bitcoin, or other coins that also use SHA-256.
Fortunately Bitcoin does have some flexibility to handle these situations. The Bitcoin developers could propose an update to the coin. This update would be a change of how bitcoins are mined. It could be an algorithm change, or even a change to POS ( Proof of stake). If they move to proof of stake, the only way to mine bitcoin is to hold large amounts of bitcoin. Or they could move to an quantum computer resistent algorithm. Either way. SHA-256 is likely no longer going to be securing the Bitcoin Network. This means Millions of ASIC miners will suddently no longer be able to mine bitcoin. They will have to either liquidate, or try mining another coin. But if SHA-256 is hacked, most likely every other coin will also be moving to a different Algorithm, or Mining process. Meaning essentially every SHA-256 ASIC miner will be an effective brick with no real purpose.
We are talking about Billions of dollars of hardware suddenly loosing all value over night. Any Mining farm that has loans backing its operations will likely go under.
What is Bitcoin moves to Proof of Stake?
I dont' see a good outcome if this happens. Etherium has learned this the hard way. It used to be miners would mine and hold coins. The cost of mining was one the things that helps to support the price. If there is no cost to mine a cryptocurrency, there is little supporting the price. Etherium assumed that everyone would stake their coins causing less coins to be availble to sell on the markets. But over time as more people staked their coins, the profits for staking dropped lower and lower. At this point its less than 2% annually, which is pretty bad.
The next phase of bitcoin
They will have to come out with a new Algorithm that is more secure. Then people will need to develop hardware and software to mine it. It could be a very exciting time for miners, but of course manufactures are going to charge what the market can bear, and not a fair price with a little profit thrown in.
I don't know when it will happen. But if they move to Proof of stake, I am getting out. At that point Black rock will likely be sitting on millions of bitcions, and staking all of them, ensuring they can effectively control Bitcoin.