There has been a lot of rumors and speculation if coin developers of scrypt coins should hard fork their coins to try and block the influx of ASIC's and protect GPU mining.
While the Pro and Con lists can be long and convoluted, there are two main Pro's and Con's that I think of when I look at this issue.
The Pro's of forking a coin would be GPU miners would not find their investments in their mining gear obsolete like they did when the SHA-256 ASICs hit the Bitcoin world. GPU rigs are costly, and setups can be simple to complex. The time and money miners put into these setups would not be lost.
Another Pro, it could keep many coins from being exploited by even more efficient pump and dumps.
The Con's of forking a big one, hits hard. ASICs can do the same work that GPU rigs can do, using vastly less power and putting out less heat. ASICs could be a big power saver from a GPU mining farm even if it is a smaller one in someone's home.
The second big Con to me is that it would allow scrypt multipools to grow even faster killing some coins before they can even gain traction and a community to form behind them.
Litecoin Dev Team member Coblee, released a full write-up of why they are not going to fork Litecoin.
Some of the key points.
Due to recent threads about some people wanting to change Litecoin’s proof of work algorithm, I figured we should have an official response from the Litecoin development team.
The coming of ASIC miners is scary. We understand where people are coming from. We share the desire for the status quo where Litecoin remains a GPU-only coin. Unfortunately, people will make ASIC Scrypt miners when it becomes profitably to do so. With the runup of Litecoin price last year, it made sense for people to invest in developing Scrypt ASICs last year. And it is apparent that the machines will be coming sometime this year.
At first glance, it makes sense for Litecoin to change the proof of work algorithm to keep mining decentralized. ASICs threatens the original goal of Litecoin, and it threatens the mining profits of GPU miners. So I’m not surprised that whenever there’s a poll on this, most people vote to change the PoW algorithm. This is because most people don’t understand everything involved with this topic. I will try to explain this as best as I can.
We’ve actually thought about this problem for almost two years now. Every time it has come up, the consensus among the Litecoin developers is that the detriments of forking far outweighs the benefit of switching proof of work algorithm. As you may know, Litecoin was originally designed to be a CPU coin. The Scrypt algorithm made this possible. It made it so that everyone with a computer can mine Litecoin, which was Satoshi’s original plan. The Scrypt parameters were chosen to effectively balance the memory hardness with the performance of the client. At the time, it was thought that Scrypt with these params was GPU resistant. So when GPUs started coming on the scene, we considered tweaking the Scrypt parameters to make it more memory hard. Pooler helped me investigate how tweaking of the parameters would affect responsiveness with the client. In the end, we decided that it wasn’t a good idea to change it. It turned out that GPU miners did not kill Litecoin as some had feared. Then when there was rumors that a Litecoin ASIC is going to happen, we revisited this again. And for the same reason, we decided to not change.
Here’s are the reasons:
We have not come across a proof of work algorithm that is truly ASIC-proof and quick to verify. All alternatives will only delay the problem and at a considerable cost.
Hard fork is dangerous if not handled correctly
Forking a coin into 2 coins is confusing to users and can easily destroy confidence
If we were to try to convince everyone to switch to an alternate PoW algorithm, it will be next to impossible. Let’s look at each party involved:
Users - Users will be split. Some will switch to the alternate client. Some users will not know or understand this change or decide to stick to the original client. This would leave them on the original fork where they can only send coins to other people on their chain. Coins sent between users on different forks will be lost. User confusion over what is a “Litecoin” would be an issue.
Miners - In general miners will mine any coin that is most profitable for their hardware at that moment. So it is easy to convince GPU owners to mine an alternative coin as the majority of them do not care about what they are mining. This is so true that most alt coin miners do not even keep a blockchain for the coins they are mining.
Pools - Similar to miners, pools, do not care about the particular coin. They will service miners to mine whatever coin is most profitable at that moment.
Merchants - Merchants WILL have to make a choice. Most will likely stay on the original fork, because why change something that’s not broken and because most merchants will not be aware of this change. A few merchants will accept coins from both forks and will cause total confusion. A few merchants will switch to supporting the alternate fork and will have to put some text on their website telling users of this. Merchants processors will have to make a choice. One of the reasons Coinbase is not currently supporting Litecoin is because of user confusion. The confusion from two things claiming to be called Litecoin would just make matters worse.
Exchanges - Exchanges WILL have to make a choice or support both coins. My guess is that BTC-e will not change as they wouldn’t want to risk it since Litecoin makes them so much money. Cryptsy will likely support both coins. It will just add the alternate fork as one of the many currencies it supports. Exchanges will have to specify if they support the alternate fork or the original fork.
Would ASICs kill Litecoin? No
Would it be better if Litecoin’s PoW is ASIC resistant? Yes
Is it worth the risk to change it now? No
I will not post the rest as you can read the entire thread on LitecoinTalk.
These were key points I wanted to share from the thread. There is so much more excellent information there as well as technical information from Litecoin Team Developer Warren.
I think in the long run this is a great move by the Litecoin Developers. It clears up the uncertainty and rumors while showing the way forward for Liteoin.
Now what remains to be seen is how other coin Dev's take this news and what they do or do not do to their coins.
Caleb Chen wrote about the race to the bottom, and it is on with scrypt ASICs hitting the market hard and fast. I also wrote about the DualMiner scrypt ASIC USB miner. They are out in numbers now with Gridseed 5 chips units and more types coming out in the near future. There are going to be lots of choices and many will fall yet it will be interesting to see who is still standing when the dust clears.