Zcash–the cryptocurrency supporting truly anonymous transactions–launched on Friday, October 28, 2016 with some of the most enthusiastic and widespread coverage recent developments in the cryptocurrency industry have seen.
Opening prices raised eyebrows
The first trades on Poloniex vastly exceeded even unreasonable expectations: thousands of BTC/ZEC. However, the supply of ZEC was so constrained that both trade volumes and potential sellers were low. The first block awarded just .000625 ZEC, as part of Zcash’s “slow start” to ZEC emission.
Mining shifted rapidly away from Ethereum
Mining Zcash involves solving the Equihash algorithm, which is highly resistant to ASIC mining. A contest for an open-source GPU miner looked like it would be unsuccessful, but a couple days before Zcash launch, some solutions emerged. The first mining power on Zcash was likely a mix of CPU and GPU miners. Existing mining infrastructure that could be repurposed for Zcash is mostly pointed at Ethereum–the most valuable ASIC-resistant cryptocurrency. It was anticipated that mining power would shift away from Ethereum and toward Zcash.
Despite the hype, initial mining was so concentrated that only two mining accounts mined the first 100 blocks. One account mined 82 of them.
Zcash mining is reported in sol/s rather hash/s, making direct comparisons between the two misleading. In addition, different cards might perform better with one due to differences in software, optimization, and hardware conditions. Nonetheless, they are similar enough to compare changes over time, and there is evidence mining power for ETH fell while it rose for ZEC.
The hashrate of Zcash in the 24 hours after the genesis block spiked from around 700,000 sol/s to 3,150,000 sol/s over the weekend. Ethereum mining power fell by 25% during this time–the equivalent of 1.6 Terahash. Between Sunday and Monday, it looked like hashpower shifted back to Ethereum.
Small (if any) gains in overall mining infrastructure
One important question is whether Zcash induced more mining or merely shifted mining activity. Additional overall investment in mining infrastructure could be a vote of confidence for cryptocurrency markets.
As stated above, mining power is measured differently in the two currencies. That said, there are some GPUs for which there are estimates of mining power for both Ethereum and Zcash. The Radeon RX 480 has an Ethereum hashrate of 25 Mh/s and a reported Zcash rate of 39 sol/s. We translated the respective mining power of the two networks into common “Radeon RX 480” units–in other words, how many Radeon RX 480’s would be needed to support the given network mining power. (note: mining doesn’t quite work like this, given the number of variables that impact realized rates and the diversity of hardware in each network. Nonetheless, it’s enough to draw some inferences.)
The number of RX-480-equivalents rose from approximately 297,000 before Zcash’s launch to 308,100 by Monday. It’s actually not much evidence in support of net new mining: only the equivalent of 10,500 GPU cards. According to many forums, users were mining Zcash with CPUs, which while they are an order of magnitude less powerful than GPUs, are most likely not mining Ethereum at all and will probably fade out as GPU mining becomes more common. Many other cards could also have been repurposed from mining non-ETH coins.
If there were real overall gains so far, they were likely modest. The absurdly high price, recent release of GPU miner, and the ‘slow start’ to Zcash emission all make conclusions tentative.
The overall finding is not surprising. As part of Ethereum’s transition to Proof-of-Stake consensus, the “difficulty bomb” will make mining for ETH progressively more difficult until it becomes impossible. In other words, the future of GPU mining infrastructure is not with ETH. It might be with ZEC.