Earlier this week, Binance Research released a report on the implications of the Monero hard fork, which occurred on March 9. On one hand, the research provided a detailed report on the privacy and security update that went live during the upgrade, while on the other hand, the report concentrated on ASIC miners and the possible outcomes of the hard fork.
Initially, the hard fork was set to take place later in April, however, it was advanced due to rising concerns of centralization because of the increasing number ASIC miners on the network. To achieve this, the team changed its Proof-of-Work [PoW] algorithm from CryptoNight V8 to CryptoNight-R.
The report stated that this hard fork had three sub-consequences on miners using ASIC mining equipment. The first sub-consequence was that there was a sudden drop in the hashrate. According to the report, Monero’s hashrate plummeted by “roughly 70%” between March 8 and March 10, “validating previous pre-fork estimates about the heavy contribution rate of ASICs to Monero’s total network hashrate”.
The second sub-consequence was that it resulted in an increase in block profitability. The report claimed that the profitability per block witnessed a significant increase of over 200%, a direct result of a decrease in the difficulty of mining a block. It further stated that the network’s mining difficulty, on “an average” had decreased by over 70%, which was in accordance with the fall in hash rate.
The report read:
“Meaning that the same CPU or GPU card on average could produce nearly 3 times as many Monero post-fork, on average […] so removing their contributions to the network means that the average variable cost of mining on Monero is much higher using general purpose units […]Lowering network difficulty also offers a more even playing field […]”
The next prominent sub-consequence was the block time, which increased from an average of 2 minutes to over 10 minutes, as of March 10. The reason for this was that the mining difficulty was not mathematically designed to adjust instantly, even though ASIC miners were excluded almost immediately after the hard fork. The report further added:
“As a consequence, fewer miners were competing for blocks with pre-fork difficulty levels that assumed higher network aggregate hashrates, leading to longer block times […] It took roughly 36 hours for the average block-time to return to the normal average of two minutes per block.”
More so, the report presented two outcomes of this hard fork; mining remained “fairly unprofitably” for household miners and the drop in the hashrate could have resulted in a “higher probability of a 51 percent attack”.
The first outcome revealed that the “month-on-month in absolute USD terms is fairly low” irrespective of the increase in the profitability and the decrease of difficulty. The report said,
“In comparison, the April 2018 fork (“Fork 1”) had a larger impact in mining profitability, as the price of Monero was more than 3 times higher than XMR price in March 2019, resulting in a much wider magnitude in USD-denominated mining profitability in the aftermath of the two forks.”
The second outcome suggested that there was “a slightly higher risk” of a 51 percent attack on the Monero network, a result of over 70 percent drop in its hash rate. The report stated,
“In general, ASIC miners may lead to centralization of the mining activities behind any PoW asset, but their absence also exposes a greater tail risk for the network. Achieving “ASIC resistance” remains a cat and mouse game and there is a trade-off between staving off centralization and boosting mining participation rate.”
Smooth_xmr, an XMR core team member, said on Reddit:
“The 51% attack statement is just entirely wrong. You can’t meaningfully compare hash rates across different algorithms. Considering only the hash rates, it is possible the network got more secure, less secure, or stayed about the same.”
Jonaemahina, a Redditor, said:
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