There are two developments in the crypto-currency space that are disruptive to the economics of scrypt coins. The first is multi-pools and the second is scrypt ASICs.
Coin switching to mine the most profitable coin then immediately converting newly created coins to a target currency isn't a new idea. Mining the most profitable coin and immediately selling it achieves a higher Return On Investment (ROI) for equipment and input costs (electricity, time, space). Finding the most profitable coin and making sure rigs were pointed to them took time, then along came the multi-pool, a miner could simply point a rig at the pool and all the hard work was done.
The Proof of Stake (PoS) multi-pool is an extension of the multi-pool idea, miners simply point their rigs at a pool and the operators do all the hard work of finding the most profitable coin and converting it into the currency selected. This has an economic effect of draining the profitable coin of it's market capitalization with constant sell pressure and raising the market capitalization of the target currency, it is simply a transfer, nothing is gained and some is lost through fees and switching costs. This is not a symbiotic relationship, it is rather a host - parasite relationship. After the PoS parasite sucks it's host dry it must move on to the next host or die, this will have the effect of draining most easily multi-pooled coins of their market cap. Coins that can avoid being a host for PoS multi-pool parasites are more likely to maintain market cap than coins that do not.
GPU mining is currently the most popular method for mining scrypt based coins but this is about to change. When ASICs made GPU's obsolete for mining Bitcoin those compute cycles followed the money to Litecoin and the hundreds of scrypt coin copies that have come along in the last year. Scrypt ASICs have begun to roll out and many more are scheduled to begin shipping soon. GPU mining scrypt coins will become less profitable and those compute cycles will need to find a new home. Various new ideas have come along in the last few months in anticipation of this change. These coins, touting "ASIC Resistance" and ASIC Proof" features, are likely to be the beneficiary of this GPU migration.
I believe many of these ASICs will be pointed at multi-pools, painting sell pressure targets on profitable scrypt coins. Together, PoS multi-pools and ASIC migration will be the double whammy that is likely to weed out many weaker scrypt coins. I have my doubts that many of the new coins touting resistance to ASICs are truly resistant, if there is enough economic incentive a new technology will emerge to take advantage of that incentive. This will then lead to more GPU migration as those compute cycles seek profitable homes once again.
GPU miners will constantly need new ways to profitably run their compute cycles. The flexibility of GPU computing and inflexibility of ASIC computing is what makes it easy to create a new algorithm and move on but technology always catches up.
What if, for instance, instead of moving those GPU's to another meaningless algorithm those compute cycles were used for a socially useful purpose? What if, instead of the thousands of megawatts of power being wasted on an arbitrary algorithm that power was used to make advances in science and research? What if, instead of profit from cloud computing services being left in the hands of multi-national corporations is was distributed to individuals contributing to a distributed compute network?
There is one coin I have found that has solved all of these problems, it is naturally ASIC resistant, multi-pool resistant, pays individuals for contribution to a distributed compute network, and as the network scales more resources are directed at socially useful purposes and less are used for securing the network. This coin is Gridcoin.
How is Gridcoin ASIC resistant? The block reward is variable, to get the full reward you must participate in the BOINC network. The reward scales with your contribution to the BOINC network and the contribution rate requirement grows as the Gridcoin network expands.
How is Gridcoin multi-pool resistant? Once again the block reward is variable, a multi-pool will only have the ability to achieve the lowest reward of 5 coins without also contributing a massive amount of compute power to the BOINC network. At a difficulty of just 10 the Gridcoin price would have to be 150,000 Satoshi to be profitable enough to be in the range where multi-pools would begin considering it for inclusion. The difficulty retargets every 30 minutes with 2.5 minute block times, giving pool hoppers a window of only 12 blocks or just 60 coins before the difficulty increase makes the coin unprofitable to the multi-pool once again, by comparison a full time BOINC contributor receives 150 coins per block. The reduction in reward for that period will have the added benefit of limiting the sell pressure. The network is thus self correcting and regulating to benefit individual machines contributing to BOINC while penalizing large pools providing no contribution.
Gridcoin is a new way to think about distributed compute networks. The flexibility of CPUs and GPUs can be used for virtually any computation, if the resources wasted on the hundreds of script coins were redirected to the BOINC network, advances could be made in math, science and research for the good of humanity. A network this large would allow research resources to be distributed to the public, freeing research institutions to work on more value added projects than expanding their in-house compute power. Additionally as the network develops and grows commercial applications will become available to tap the network, this will capture a part of the estimated $19.5 Billion cloud computing market, distributing profits to individuals instead of multi-national corporations.
Join the conversation about the future of distributed compute networks at www.reddit.com/r/gridcoin
Coin switching to mine the most profitable coin then immediately converting newly created coins to a target currency isn't a new idea. Mining the most profitable coin and immediately selling it achieves a higher Return On Investment (ROI) for equipment and input costs (electricity, time, space). Finding the most profitable coin and making sure rigs were pointed to them took time, then along came the multi-pool, a miner could simply point a rig at the pool and all the hard work was done.
The Proof of Stake (PoS) multi-pool is an extension of the multi-pool idea, miners simply point their rigs at a pool and the operators do all the hard work of finding the most profitable coin and converting it into the currency selected. This has an economic effect of draining the profitable coin of it's market capitalization with constant sell pressure and raising the market capitalization of the target currency, it is simply a transfer, nothing is gained and some is lost through fees and switching costs. This is not a symbiotic relationship, it is rather a host - parasite relationship. After the PoS parasite sucks it's host dry it must move on to the next host or die, this will have the effect of draining most easily multi-pooled coins of their market cap. Coins that can avoid being a host for PoS multi-pool parasites are more likely to maintain market cap than coins that do not.
GPU mining is currently the most popular method for mining scrypt based coins but this is about to change. When ASICs made GPU's obsolete for mining Bitcoin those compute cycles followed the money to Litecoin and the hundreds of scrypt coin copies that have come along in the last year. Scrypt ASICs have begun to roll out and many more are scheduled to begin shipping soon. GPU mining scrypt coins will become less profitable and those compute cycles will need to find a new home. Various new ideas have come along in the last few months in anticipation of this change. These coins, touting "ASIC Resistance" and ASIC Proof" features, are likely to be the beneficiary of this GPU migration.
I believe many of these ASICs will be pointed at multi-pools, painting sell pressure targets on profitable scrypt coins. Together, PoS multi-pools and ASIC migration will be the double whammy that is likely to weed out many weaker scrypt coins. I have my doubts that many of the new coins touting resistance to ASICs are truly resistant, if there is enough economic incentive a new technology will emerge to take advantage of that incentive. This will then lead to more GPU migration as those compute cycles seek profitable homes once again.
GPU miners will constantly need new ways to profitably run their compute cycles. The flexibility of GPU computing and inflexibility of ASIC computing is what makes it easy to create a new algorithm and move on but technology always catches up.
What if, for instance, instead of moving those GPU's to another meaningless algorithm those compute cycles were used for a socially useful purpose? What if, instead of the thousands of megawatts of power being wasted on an arbitrary algorithm that power was used to make advances in science and research? What if, instead of profit from cloud computing services being left in the hands of multi-national corporations is was distributed to individuals contributing to a distributed compute network?
There is one coin I have found that has solved all of these problems, it is naturally ASIC resistant, multi-pool resistant, pays individuals for contribution to a distributed compute network, and as the network scales more resources are directed at socially useful purposes and less are used for securing the network. This coin is Gridcoin.
How is Gridcoin ASIC resistant? The block reward is variable, to get the full reward you must participate in the BOINC network. The reward scales with your contribution to the BOINC network and the contribution rate requirement grows as the Gridcoin network expands.
How is Gridcoin multi-pool resistant? Once again the block reward is variable, a multi-pool will only have the ability to achieve the lowest reward of 5 coins without also contributing a massive amount of compute power to the BOINC network. At a difficulty of just 10 the Gridcoin price would have to be 150,000 Satoshi to be profitable enough to be in the range where multi-pools would begin considering it for inclusion. The difficulty retargets every 30 minutes with 2.5 minute block times, giving pool hoppers a window of only 12 blocks or just 60 coins before the difficulty increase makes the coin unprofitable to the multi-pool once again, by comparison a full time BOINC contributor receives 150 coins per block. The reduction in reward for that period will have the added benefit of limiting the sell pressure. The network is thus self correcting and regulating to benefit individual machines contributing to BOINC while penalizing large pools providing no contribution.
Gridcoin is a new way to think about distributed compute networks. The flexibility of CPUs and GPUs can be used for virtually any computation, if the resources wasted on the hundreds of script coins were redirected to the BOINC network, advances could be made in math, science and research for the good of humanity. A network this large would allow research resources to be distributed to the public, freeing research institutions to work on more value added projects than expanding their in-house compute power. Additionally as the network develops and grows commercial applications will become available to tap the network, this will capture a part of the estimated $19.5 Billion cloud computing market, distributing profits to individuals instead of multi-national corporations.
Join the conversation about the future of distributed compute networks at www.reddit.com/r/gridcoin