With Dogecoin‘s hashrate dropping fast, the community is looking at ASIC miners to secure the coin’s future. ASICs are actively being marketed and the community has even started a fundraiser to buy a dedicated Dogecoin ASIC miner. But despite good intentions, the only ones to benefit from initiatives like this are businesses selling ASIC miners. Crowdfunding network security is a costly exercise, and therefore not a viable long-term solution to the current uncertainty surrounding Dogecoin’s mining.
Required investment amount
The cheapest Scrypt ASIC miner in terms of cost per MH/s is currently offered by Flower Technology. 300 MH/s has a price tag of $7,900. Assuming that this can actually be delivered, it would leave the cost of 1 GH/s at a little over $26,000. WafflePool, the biggest pool in the Dogecoin network, is capable of reaching a total hashrate of 35 GH/s. To compete with this, the community would have to spend over $900,000.
The previous would not be a one-time investment. ASICs are rapidly improving. Just half a year ago, the same pricetag would only fetch one tenth of the currently promised hashrates. If this trend continues, ASICs will be a hundred times faster one year from now. An investment of $900,000 would then yield a hashrate of 3,500 GH/s, and the current investment would be equal to $9,000 worth of hashrate. This means that a recurring investment is required to keep security at about the same level.
The cost could turn out to be even higher, as it is assumed that the ASIC miners are able to operate at zero additional costs. Running these machines will require a lot of energy, despite being relatively efficient. If the value of a single coin does not increase, it seems questionable whether they will be able to generate some profit at all. Overall, even the most optimistic scenario will still set the community back nearly one million USD annually. If every community member would buy their own 450 KH/s ASIC miner (currently priced at $75 each) to support network security, the total annual required community investment could be nearing six million USD. As Dogecoin is set to generate five billion new coins per year as of 2015, this would equal a total reward of roughly two million USD at current price levels not including energy costs. A bet on ASICs is therefore one with a pretty poor outlook, although it is good news if you happen to be selling them.
So what do you think would be the best way to secure the network?
Well, you can either do nothing or implement a new algorithm. The latter requires a hard fork, and there is no obvious alternative available. I’ve examined some of the most used ones, but these will change a lot more than just mining (although they would probably fix that part).
On the other hand, doing nothing could work out if Dogecoin’s value goes up tenfold in the coming months. Inflation rates will drop a lot, so that won’t hold back the value as much. Given the timeframe, Dogecoin would likely need a big catalyst to make this happen. Something like Coinbase integrating Dogecoin, although this isn’t likely to happen any time soon.
Lastly, a drop is hashrate doesn’t automatically mean a feared 51% attack will follow. With two million USD per year still available for miners, there will always be some left. Overall, there is some time left to simply sit back and see how things develop. Maybe some brilliant new algorithm pops up in the comings months or maybe Dogecoin’s value does increase tenfold. Doing nothing is a big risk, but so is changing something. In any case, sellings ASICs to the community isn’t going to make the difference.