While the blockchain world was preoccupied with other newsworthy stories, from the now-delayed Ethereum hardfork to exchange hacks, Monero miners have nervously been watching a very unusual phenomenon unfold in front of them. Monero, once a very profitable privacy coin to mine, have suffered like all PoW coins during the longest Bitcoin bear market to date. But those that are watching the network are scratching their heads as profitability is decreasing while hashrate is increasing.
Monero is known to be a very anti-ASIC project. In fact, in 2018 alone the project forked two times to combat the rise of ASIC miners — once in April and again in October to the newer Cryptonight V8 algorithm. These forks resulted in more than 5 different Monero chains, all promising better and more secure features… but as expected, the main Monero chain prevailed in the end.
Price has declined for three months straight, yet there is more hashpower pouring into the network.
At the current time of writing, Monero is hovering just above the $40 mark — a stark difference from its all time high of $720. Despite the whole ProgPOW vs no-ProgPOW discussions that are going on, Ethereum is still marginally profitable for most miners. On the other hand, Monero mining is not profitable at this time. To put into perspective, an 8-GPU AMD RX580 mining rig at 6 cents per kW/h, Ethereum is profitable by around $2 a day. Monero, even with the correct undervolting settings, would post a loss of $0.50 a day. Mimblewimble coins like Grin and BEAM, are seeing profitability levels that the industry has not seen in a very long time. So the $720 million dollar question arise: where is the hashpower for Monero coming from? We can rule out small time hobbyist miners, mid-sized facilities that are slowly beginning to recover their 2018 losses, and large enterprise GPU-mining operations that have made the switch over to Mimblewimble coins and/or are still mining Ethereum. It just doesn’t make sense for anyone to be mining Monero right now, and it definitely makes it more perplexing that hashrate is rising instead of falling.
Many of us are at a loss for words. The economics of the hashrate and difficulty increasing while profitability decreasing simply does not make sense. My intuition says that malice is the intention for this phenomenon, and Lunar Digital Assets will be watching the Monero network very closely. Please feel free to reach out to me if you have an idea of what’s going on.
Edit: It appears that there has been a very lengthy discussion on this topic in this Reddit thread. I have not considered FPGAs, but it could be the culprit of the increasing hashrates. In short, FPGAs are very similar to ASICs — but they are more power hungry and harder to mass produce. However, unlike ASICs, they are reprogrammable and the learning curve to is much lower than designing an ASIC chip. Thank you /u/exoticparticle for bringing this to my attention. With that, I will leave you with this very informative video on FPGAs.