Scrypt algorithm aims to maintain decentralization in crypto mining and offer a bigger chance for GPU miners to succeed. How does it compare to ASIC and what cryptocurrencies use this algorithm?
Although it is still relatively young, the world of cryptocurrency has expanded quite a lot in recent years. Cryptocurrency has gained a lot of popularity and is widely known to be able to offer a huge opportunity to make money. You are probably already familiar with how digital currencies are bought and sold on the marketplace, but keep in mind that this is not the only way to take profit in the crypto world. Another alternative that you can try is crypto mining, which requires the miner to solve mathematical equations as fast as possible in order to gain crypto coins. Crypto mining is needed to verify every crypto transaction and add a new block to the blockchain network.
However, crypto mining is not as simple as purchasing digital coins. It needs specific software, advanced computational hardware, and strong algorithm, which are mostly expensive and difficult to get your hands on. Besides, being a crypto miner means competing with other miners to be the first to solve the puzzles or you won't get paid. This is why apart from picking the tools, you also need to understand how blockchain and crypto mining works.
One of the algorithms used in crypto blockchains is called scrypt, which is known to be more accessible and user-friendly. So, what is scrypt mining and how does it work?
Getting to Know Scrypt Mining
Scrypt is a type of Proof-to-Work (PoW) algorithm. It's basically an alternative to the SHA-256, which is usually used in the Bitcoin mining process. Scrypt mining itself refers to the special hardware that is used to mine crypto coins that are encoded with the scrypt algorithm. Like other mining processes, scrypt mining involves solving the mathematical problems and cryptographic codes on the scrypt-supported blockchain in order to add a new block to the network and earn coins as rewards.
The scrypt algorithm was invented by Colin Percival back in 2009. Initially, the algorithm was used for Tarsnap, an online backup service for operating systems like LINUX. However, the simplified version of the algorithm was soon used to mine crypto as well. An anonymous programmer called ArtForz was the first to use it. Scrypt algorithm for crypto mining was then first implemented on Tenebrix, which was released in September 2011. Later, it was also adopted by Litecoin and Dogecoin as the base of their blockchain's mining algorithm.
Scrypt is designed to improve the hashing algorithm of the SHA-256 and emerge as the solution to improve network security. Compared to SHA-256, scrypt algorithm is less complex but it requires the miner to have more memory for efficient problem-solving. Therefore, the crypto mining process for scrypt algorithm is often done with a Graphics Processing Unit (GPU), which typically has much greater memory and processing power than CPUs.
How Does It Work?
In a nutshell, scrypt aims to complicate the mining process by adding more derivation of keys to the puzzle. It involves the use of "noise", which refers to a set of random numbers created by the hash algorithm and stored in memory. The purpose is to camouflage the real key data from the algorithm, making it harder for miners to find the cryptographic solution to the puzzle. As a result, it will take longer for miners to calculate and solve the problem.
To be fair, such a system has generated negative critiques from many crypto developers, as it gives miners with large resources more benefits and violates decentralization. Nevertheless, it is actually pretty useful as some sort of a defense mechanism to minimize hackers and fraudsters from entering the blockchain. Since the problem is harder to solve, hackers will require more time and effort to breach the system.
Scrypt Mining Vs ASIC
In the early days of cryptocurrency, Bitcoin was originally mined by using CPUs, GPUs, and FPGAs. This shows that the blockchain is still highly decentralized, so practically anyone can participate in Bitcoin mining. However, it didn't take long before people realized that Bitcoin mining would be much easier if they use custom hardware, especially that conventional GPUs need so much power they could harm the environment.
Miners then began to develop and use Application-Specific Integrated Circuit (ASIC) to mine Bitcoin in the SHA-256 algorithm. ASIC mining is at least 1000x more powerful and efficient compared to GPU mining. Unfortunately, this has led to the centralization of mining hash rates to a few giant mining pools and made it way harder for individual miners to succeed. This is what the scrypt algorithm is trying to tackle.
Instead of high processing power, the scrypt algorithm focuses more on system memory, so regular people can enter the system with more ease. Thanks to this, individual miners can get involved in the mining process without having to use ASIC.
However, we must know that even now, the scrypt algorithm has not been able to ban ASIC entirely. That is why Scrypt is often called ASIC-resistant, but not ASIC-proof. So far, there have been a handful of ASIC miners who operate in the scrypt-based blockchain. This indeed could lead to centralization, but it is still not nearly as bad as SHA-256 ASICs. After all, scrypt ASICs are only about 100x more efficient than GPU mining, compared to the 1000x in the SHA-256 ASICs.
One of the newest additions to the scrypt algorithm is the "scrypt-n" algorithm, which aims to be more ASIC-resistant. One of the notable examples of coin that uses this system is Vertcoin. In the scrypt-n algorithm, ASIC would be pretty much useless because the algorithm will alter itself for the ASIC users, but it won't affect the GPU and CPU miners' relative hash rates. Apart from that, there are also scrypt-jane and X11 hashing algorithms that also aim to further resist ASICs.
Scrypt Mining Advantages
- The use of RAM or memory storage makes scrypt mining more user-friendly.
- You can use a normal modern CPU or GPU to mine instead of ASIC.
- The algorithm offers speedy crypto transactions because it was designed to use memory storage.
- Since ASIC players are not overly powerful in the scrypt algorithm, there's a higher chance of succeeding.
- The network is more decentralized and balanced, so the competition is better.
- The low power consumption makes crypto mining less expensive.
- Scrypt can handle many transactions at once and the users can directly mine blocks on the network.
Cryptocurrencies that You Can Mine with Scrypt Miner
Since the invention of Litecoin and its scrypt algorithm, a number of new coins began to rise and become popular. There's also Dogecoin, which now has become one of the most popular meme coins that attract interest from worldwide figures.
1. Litecoin (LTC)
Litecoin is the first cryptocurrency to implement scrypt algorithm. The coin was introduced back in 2011 and has grown to be one of the most highly anticipated virtual currencies today. Litecoin claims to be decentralized and easily accessible for anyone. According to Coinmarketcap, the price of Litecoin is currently at $162.88 and the market cap is around $11 billion.
2. Dogecoin (DOGE)
Dogecoin was released in 2013, featuring the viral Shiba Inu portrait from the Doge meme. It was created by software engineers Billy Markus and Jackson Palmer. Interestingly, Dogecoin was initially made as a "joke" but is able to gain great popularity among crypto enthusiasts. At first, it was mostly used only for crowdfunding or to tip online content creators. Thanks to its low price and fast transactions, the coin becomes so popular that it is recognized by influential people such as Elon Musk and Snoop Dogg. According to Coinmarketcap, the coin is currently priced at $0.18 and has a market cap of $24 billion.
ReddCoin is probably the first crypto that is integrated with the majority of popular social networks. The coin can be extended to multiple platforms and used as the "unit of account" for various online social interactions. The main purpose is to tip, share, and donate to various content creators and social causes. According to Coinmarketcap, ReddCoin is currently priced at $0.0013 and has a market cap of around $38 million.
In summary, scrypt is an algorithm that was developed as a solution to fight the dominance of ASIC mining platforms and the centralization of crypto networks. The scrypt algorithm requires large memory storage instead of high computing power, thus widening the access for individual miners to participate. On the other hand, the algorithm requires longer time to calculate and complicates things for specialized ASIC miners and hackers.
If you are interested in crypto mining and planning to go solo, this is a great opportunity to try. However, keep in mind that crypto mining is not easy and definitely not cheap. Even with scrypt algorithm, you still need to use advanced software and hardware equipment, so make sure to take that into consideration and consider the risks that come with it.