We have made the difficult decision to make an adjustment on our mining algorithm to make it more GPU friendly while awaiting for MTP development completion. The original vision for the current algorithm was to make it so that it was fair for everyone to mine and that anyone with a CPU could participate. This means that no one person can easily acquire an advantage by developing ASICs and even opens participation to those with no GPUs. We did take into account cloud mining operations but were of the opinion then that since people were paying for cloud mining, this didn’t afford them any significant advantage since they were paying for the hashing power. Our current algorithm also discourages botnet mining due to the high RAM requirements which would degrade performance on most computer significantly making them more likely to detect. This is also one of the aims of the MTP mining algorithm which we are currently in the process of implementing.
What we didn’t forsee was the abuse of cloud mining credits, those that are given free or for certain events, and you’ll often find these credits sold online for around 20% of the true price. Strictly speaking, this on its own isn’t an issue since one of the conditions of these credits is that it is not to be used for cryptocurrency mining and that these accounts should be terminated by the provider. However what we’ve witnessed is the massive use of cloud mining credits, all bought at significant discounts and used on dummy accounts so that when they are terminated, there is no consequence. Some even purchase such credits with stolen credit cards. From what we’ve observed on the mining pools, a group of less than 20 people dominated more than 80% of the hash rate which goes against the whole point of making a CPU friendly algorithm.
These miners are also under a strong incentive to dump the coins that they mine almost immediately which lead to a lot of artificial selling pressure. With a coin so early in its release schedule, our opinion was that it wasn’t healthy to continue to allow this to the detriment of early adopters of Zcoin.
Another added benefit is that with the current implementation of our algorithm, it places a very heavy load on pools leading in instability. It is hoped that with the temporary algorithm change, mining pools will be more stable.
As such we will either change the algorithm or tweak the existing algorithm to allow GPU mining but will still allow CPU mining and are currently testing different configurations. This will make it less profitable for cloud miners even with their discounted credits and hopefully spread out the hash to more people allowing better distribution of the coin instead of letting a few people who misuse credits. This is a temporary fix until our MTP development is complete that is estimated to be around the end of March. Once we have finalised the parameters, we will give a two weeks notice to pools to update.
We thank you for giving us feedback on this and your patience on the matter.