A coin is considered ASIC-resistant if it can be mined without using ASIC miners (Application-specific Integrated Circuits).
ASICs, as the name implies, are integrated circuits designed to execute a specific computing task. Mining farms use ASIC-based computers to optimize the Proof-of-Work (PoW) required to mine a cryptocurrency (such as Bitcoin) in the cryptocurrency space.
The process of mining a cryptocurrency require computers on the network to confirm transactions grouped as a block. For this block to be added to the chain, computers have to repeatedly solve complex puzzles to derive a one-way mathematical solution (this process is called hashing). ASICs are specially optimized to carry out multiple hashing functions per second at impressive energy efficiency levels, improving the hashing rate on the network and, consequently, better security and faster transactions.
Great! Right? Maybe not. ASICs challenge the fundamental basis of a cryptocurrency – decentralization.
ASIC resistance explained – What does it mean for a coin to be ASIC resistant?
Given ASICs (Application Specific Integrated Circuit) miners are specialized machines, several massive mining farms constitute a major portion of the entire network’s hashing power. This is because average cryptocurrency miners cannot generate the computing power required to match hashing rate and hashing power of these major mining farms using consumer-grade hardware like personal computers.
This centralizes the hash power of the Bitcoin blockchain network to a few locations in the world, which was the primary cause for the hash power of Bitcoin’s network dropping by almost 50% in early 2021 due to a power outage at a massive mining farm in Northern China.
ASIC-resistant cryptocurrencies are a way to challenge this centralization of the hashing power of a blockchain network. The protocol and mining algorithm of ASIC-resistant cryptocurrencies are such that it is almost not profitable mining them with ASIC machines. In some cases, it is even worse than using generalized CPU and GPU hardware.
However, the hashing algorithm of ASIC-resistant cryptos is constantly modified and improved as ASIC manufacturers constantly improve on the ASIC miners. Some newer models have been seen to bypass the hashing algorithm of some ASIC-resistant coins.
What cryptocurrencies are ASIC resistant?
Ethereum is the most popular and largest cryptocurrency with the most Application Specific Integrated Circuit (ASIC) resistant hashing algorithm (called Ethash). The Ethereum mining algorithm was designed to be ASIC-resistant in a bid to lower the entry barrier posed to lone miners and encourage mining pool communities.
Other notable coins with ASIC-resistant hash functions include Monero (MXR), Vertcoin (VTC), and Horizon (ZEN).