You have probably heard the news – SIA creator David Vorick announced that they are planning on hard forking SIACoin to kill any existing SIACoin ASIC, with the exception of the Obelisk SC1. This will bricking many thousands mining devices that produce about 96% of the actual network hashrate. The fork is planned for October 31.
This is an intricate topic and there are several factors that come into play. I will not delve into the ethical side of the matter – after all, everyone has got their own vision of what is ethical.
Instead, the final goal of our analysis here is to help us answer one simple question: should we even consider investing into anything SIA-related?
How It All Started
For those of you who are new to the topic, let’s quickly recap what is all the fuzz about.
In 2017, SIACoin developers have decided that switching the coin to ASIC mining would improve its security. Following that decision, they have created a side project called ‘Obelisk’ and started to raise funds, and work on what was back then the first ASIC for SIA – the ‘Obelisk SC1’.
Obelisk development and shipment took quite a while and got delayed for at least a few months. Bitmain, a well-known China-based ASIC manufacturer, took the lead and released their own ASIC for SIACoin. The ‘Antminer A3’ not only was stronger than the Obelisk SC1, it also was released about half year earlier than the latter. Three months after Bitmain stepped in, Innosilicon joined the party too by releasing an even more efficient SIA Coin ASIC called the ‘S11 SIAMaster’.
Since 2017, the market situation of SIA coin changed as well. Back when the Antminer A3 was released, SIACoin was priced about 10 times higher than it is now. Combine that with the global SIA network difficulty increase caused by the existing Bitmain and Innosilicon ASICs, and you can see why the Obelisk is no longer profitable in 2018. Basically, anyone who have preordered the Obelisk back in 2017 will now be getting a device with negative profitability.
Was the Obelisk a Scam?
Back when the Obelisk SC1 was just announced, it was met with a lot of skepticism. Most of the mining community members were reluctant to pay such a huge sum of money for a product that existed only in blueprints. Some people however did put their money on David Vorick and his team. Were they scammed by Obelisk/SIA? Let’s take a look.
First of all, even though there were some delays, the company finally have manufactured and is now shipping the ASICs to those people who have preordered them. The ASICs, while no longer profitable due to current market and network conditions, do mine as advertised.
SIA team has even announced a compensation system to make up for the Obelisk units shipment delay. The compensation is up to $155 USD for the SC1 and up to $411 USD for the DCR1. Those numbers are based on how much you would have earned if the unit would be shipped to you in time. Anyone who have preordered units from batch 1-5 is eligible for compensation.
David Vorick and his team haven’t scammed their customers, let’s give them that. I know plenty of companies that would open preorders, grab as much money as they can and then vanquish. SIA is definitely not one of them, therefore any claims that SIA/Obelisk “scammed” their customers is pretty much inaccurate.
SIA Hard Fork
That being said, due to the delay in shipment of the Obelisk, and the unwillingness to hard fork when the Antminer A3 was just announced, David Vorick is now shipping a product that is pretty much useless.
To solve that, David decided to hard fork SIA Coin and kill all other ASICs than the Obelisk SC1 October 31 of this year. This means that people who have their Antminer A3 and S11 SiaMaster units will no longer be able to use them to mine SIA.
This also means that after the hard fork, Obelisk (SIA) will get the monopoly in ASIC production for SIACoin.
Yeah, the Obelisk is not good enough to compete with what Bitmain and Innosilicon offer. In fact, one of the community members said about what he believes is the true reason of the hard fork:
My question is – how true is that? Because if it is the case then SIA is not a company that can be trusted. Let me elaborate.
Is SIA Contradicting Itself?
In their blog, there is an article on the latest project by the SIA team. Even though they are talking about a different coin, they do seem to understand and acknowledge that ASIC monopoly is not a good thing:
…at launch, the coin is centralized around a single ASIC manufacturer. We believe that this is the best way to guarantee a clean and fair start for a coin, however it is not the right way for a coin to exist perpetually.SIACoin Blog
Now, the statement above is the opposite of what they are about to do to SIACoin. It’s obvious that killing all competition equals monopoly. Yeah, the hard fork will help those who trusted in Obelisk and in SIA in 2017 but on the other hand, it will screw over all the people who bought an Antminer A3 and an S11 SiaMaster. Those people are active part of the SIA community too.
It is also worth mentioning that all of the Obelisk SC1 units are expected to produce no more than 3,7% of today’s global SIA hashrate. SC1 users are the minority and by hard forking, David Vorick will be sacrificing the investments of the majority to favor the minority. Why is SIA doing that?
I suppose we have a best case and a worst case scenario here:
In the worst case scenario, SIA simply wants to have monopoly on SIACoin ASIC manufacturing. Not only the Obelisk is being manufactured by one single company, it is also a closed source project – no one can say for sure what other secrets and surprises the ASIC holds. In this case, people will soon realize that SIA is a bunch of scammers and will move on, leaving the project to die.
In the best case scenario, SIA is genuinely caring about the project and the community, which is why they will hard fork the coin only once to favor the people who have trusted Obelisk back in 2017.
If it is the caste, it still is a trade-off. On one hand, they might lose the support and the trust of those people who had Bitmain and Innosilicon ASICs. In exchange, they strengthen the bonds with those early Obelisk adopters.
Even though this is the best case scenario, my question is: will this action strengthen the SIA coin and its community?
Impact of the Hard Fork on the SIA Community
Let’s define what do we mean with ‘SIA Community’ before we move on. There is the majority of people who simply hold and trade the coin. Those people are the most concerned about the motivations of the company, as far as I know. Then, there are the miners – the people who will get affected the most by the fork. How many independent miners do we have in the community?
Let’s do a quick math. So far, we know that once customers will receive their ~11000 SC1 miners, those will make for around 4% of SIA hashrate. The 96% remaining hashrate is distributed among Bitmain, Halong and Innosilicon miners. My question is – do all of those miners belong to common folk like you and me?
Eventually, they do not. As for today, 43% of the SIA network hashrate is owned by Innosilicon alone. The company is mining SIA coin with the ASICs they are producing. To add more, they do not sell any more S11 SIAMaster units to the public – their website states that the S11 is “sold out”. Considering that the S11 SIAMaster is the only profitable blake2b ASIC, Innosilicon could make quite a lot of money by selling their units (the demand is pretty high). By doing so they could also avoid getting the insane hashrate they’ve got and there could be no hardfork at all. However for some reason, they have been keeping their units to themselves for a while now.
Even today, new units are being added constantly. Only two weeks ago, Innosilicon owned 37% of the SIA network hashrate. Now, they own 43%. The company is quickly and steadily approaching the 51% mark. They are not selling their units to the public, they keep manufacturing new units and adding them to their farms, every single day. Yeah I know that they might have a contract with factories for a specific amount of units so they cannot cancel it now. However, why would they get to the 37% mark to begin with?
Will Innosilicon perform the 51% attack if they manage to get enough units out before the fork? I doubt it. Most of you would agree that Innosilicon would have a hard time dealing with the consequences if they do so. They have been working hard on establishing their brand, so I doubt they would like to lose it all just to get some extra money.
That being said, the sole fact that one company is holding the majority of the network hashrate is enough to justify a hard fork. Having one company generate the lion’s share of the global hashrate is unhealthy, as well as it contradicts the concept of decentralization. As we know, decentralization is one of the few things things that make cryptocurrencies valuable and unique.
In a way, we can say that Innosilicon caused the hard fork. Innosilicon was certainly aware that both the community and developers would hate if one company took over half of the hashrate. For some reason though, Innosilicon kept on adding units to its mining farms until the situation got out of control.
Besides Innosilicon, there is also Bitmain with their farms and maybe even Halong Mining. It is clear that as for today, most of the global SIA network hashrate is being generated by 2-3 private mining farms. By forking now, SIA will damage big ASIC manufacturers the most.
Funnily enough, Bitmain’s Antminer A3 hasn’t been profitable for a while now. Neither is Bitmain’s Antpool providing a lot of hashrate. Again, even though Bitmain was the first one who have initiated the controversy regarding ASIC mining, they are probably not the main reason why SIA is forking.
Will SIA Hard Fork Again?
In the best case scenario, SIA does not want SIACoin ASIC manufacturing to remain solely in their hands for a long time. In fact, they might want to not only allow but also to motivate other companies (Bitmain included) to release their own SIA ASICs as soon as possible.
If in the near future someone like Bitmain releases an ASIC for SIA again and SIA decides to not fork then it is a good sign. Otherwise, it’s a clear red flag.
Is SIA Dying?
In the world of cryptos, we often see coins die completely in a matter of days. If you are planning on investing into anything related to SIA, here are some of my thoughts you might find interesting.
As for today, I see two main things that might go wrong for SIA. The first disaster might happen soon, right before and after the hard fork. There is no consensus in the community regarding the true motifs of SIA, which is why there is always the chance of the majority of the community dumping their coins during the hard fork and abandoning the project. If this happens, SIA will either die or slow down until it recovers.
The second thing that might go wrong for SIA is devs leaving the project because it’s a huge hassle, because it’s not unique anymore, because of the potential legal actions that some users take against them, etc. SIA developers have been working a lot on Obelisk Launchpad lately, which might or might not be a sign that they want to have a plan B.
If none of the above happens, the prospects for Obelisc SC1 owners are pretty good. With only 3,5% of the network hashrate left after the hard fork, the profitability of SC1 units might increase up to 25x times. Tempting, right?
For SIA to survive, I believe at least three conditions have to be met:
- Devs have to be genuinely and actively working towards breaking their monopoly on SIA ASIC production.
- The non-miner part of the community has to keep supporting the coin.
- Major SIACoin holders should avoid doing massive dumps – if commonfolk see a correlation between the hard fork scandal and the drop in price, they might get a wrong impression about the situation. If the community starts to panic, the project might die pretty quickly.
It might be a good idea to monitor the situation for these three things and see how it all evolves.
Why SIA Might Live
+ Working, real product and system.
+ Not a new project; Devs put a lot of work on it over these months it been around.
+ Well-known project and coin with overall decent reputation.
+ Pretty decent market – it has been stable over the past months.
Why SIA Might Die
– Community is torn apart by the decision regarding ASICs.
– There are at least two solid alternatives to SIA.
– Possibility of prolonged centralization of the ASIC production for SIA – some people might see it as a red flag and move to other projects.
With pros and cons being so even, I would say that buying SIA Coin and/or Obelisk SC1 miners is a pretty risky move. That being said, since the reward might be pretty interesting (in the case of the Obelisk SC1 miner anyway), it might be that kind of investment that people do using the money they can totally afford to lose. A gamble of sorts. If you however are looking for something more stable, SIA Coin might not be the best choice for you, for now anyway.
I hope this rant helped you to have a better view at the situation and make a better decision. While only time will show for sure whether SIA will die or not, we can at least know that there is a chance that it might happen. SIA devs might be not as greedy and stupid as some picture them, though at the same time the whole situation surrounding the project does not look very favorable either, at least from my point of view. What are your thoughts on this?
Thank you for reading. As always, your comments, suggestions and questions are welcome.
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