Ethash: Ethereum’s Proof-of-Work Algorithm

Ethash is the Ethereum PoW algorithm. It uses an evolution of the Dagger–Hashimoto algorithm, which is a combination of Vitalik Buterin’s Dagger algorithm and Thaddeus Dryja’s Hashimoto algorithm. Ethash is dependent on the generation and analysis of a large dataset, known as a directed acyclic graph (or, more simply, “the DAG”). The DAG had an initial size of about 1 GB and will continue to slowly and linearly grow in size, being updated once every epoch (30,000 blocks, or roughly 125 hours).

The purpose of the DAG is to make the Ethash PoW algorithm dependent on maintaining a large, frequently accessed data structure. This in turn is intended to make Ethash “ASIC resistant,” which means that it is more difficult to make application-specific integrated circuits (ASIC) mining equipment that is orders of magnitude faster than a fast graphics processing unit (GPU). Ethereum’s founders wanted to avoid centralization in PoW mining, where those with access to specialized silicon fabrication factories and big budgets could dominate the mining infrastructure and undermine the security of the consensus algorithm.

Use of consumer-level GPUs for carrying out the PoW on the Ethereum network means that more people around the world can participate in the mining process. The more independent miners there are the more decentralized the mining power is, which means we can avoid a situation like in Bitcoin, where much of the mining power is concentrated in the hands of a few large industrial mining operations. The downside of the use of GPUs for mining is that it precipitated a worldwide shortage GPUs in 2017, causing their price to skyrocket and an outcry from gamers. This led to purchase restrictions at retailers, limiting buyers to one or two GPUs per customer.

Until recently, the threat of ASIC miners on the Ethereum network was largely nonexistent. Using ASICs for Ethereum requires the design, manufacture, and distribution of highly customized hardware. Producing them requires considerable investment of time and money. The Ethereum developers’ long-expressed plans to move to a PoS consensus algorithm likely kept ASIC suppliers away from targeting the Ethereum network for a long time. As soon as Ethereum moves to PoS, ASICs designed for the PoW algorithm will be rendered useless—that is, unless miners can use them to mine other cryptocurrencies instead. The latter possibility is now a reality with a range of other Ethash-based consensus coins available, such as PIRL and Ubiq, and Ethereum Classic has pledged to remain a PoW blockchain for the foreseeable future. This means that we will likely see ASIC mining begin to become a force on the Ethereum network while is it still operating on PoW consensus.