Ravencoin picking up disillusioned cryptocurrency miners
The crypto-mining arms race means small miners need to dig deep for profitable coins.
At first glance, there's no reason to stop on Ravencoin. By market cap, it's ranked so deep as to be invisible and well lost in the bowels of cryptocurrency. Depending on who you ask, its market cap currently puts it at rank 1,714 (Live Coin Watch), rank 1,310 (CoinMarketCap), rank 1,501 (Investing.com) or rank 3,018 (CoinLib), while its trade volume and value can shift between zero to almost zero depending on how finely tuned your measurements are.
Despite that, it's received a few million dollars in backing from Overstock.com, according to CEO Patrick Byrne in a recent interview with Business Insider, which was followed by a flurry of interest in the coin.
"We think this coin actually has quite a future. It’s about – it’s bitcoin, but a thousand times more energy efficient. And there's other real interesting virtues to it – so Ravencoin," Byrne said.
"What I hear – from the open-source community and on the message boards – I know what they are working on and it seems – it’s really quite a – I think it has – it was launched January 3 and it’s as this open-source project. And I think it has more – last I heard – the number of miners who are now working on it – or it has spread faster than any number of miners of any coin introduced. It's really quite a phenomenon this Ravencoin.
"So – and what’s nice it’s democratized. Yeah, it – what happens is, you know, all these coins like bitcoin and such are built on – there’s a processor that’s solving mathematical problems. And it’s possible to build chips that specialize in just that problem. And so you really can’t – with your home computer, you’re not going to mine any bitcoin anymore unless you have this dedicated ASIC chip. Well, Ravencoin was designed, so you can’t do that – it's ASIC resistant. And that’s because the problem that you solve keeps flipping randomly among a bunch of class of problems."
Byrne's creative interpretation might be spot on. While being a thousand times more energy efficient than bitcoin isn't much of an achievement, the proliferation of miners might be accurate.
Bitcoin has been taken over by industrial-scale miners, backed by millions in venture capital and armed with the specially designed ASIC miners Byrne speaks of. Ethereum is ASIC resistant, but this is mostly due to its sizable memory requirements and it still hasn't stopped chip makers from creating specially designed GPUs for mining Ether.
Meanwhile, Ripple isn't minable, Bitcoin Cash tends to draw from the same mining pools as bitcoin and those who want to mine other ASIC-resistant coins like Monero will find themselves with a huge amount of competition and potentially spending more on electricity than they make from mining.
The poorly armed home miner with only one or two medium-to-high range GPUs at their disposal needs to dig deep these days. And many of them have dug deep enough to find Ravencoin and enjoy the results.
Byrne is referring to Ravencoin's X16 mining algorithm, which continually flips between 16 different mining algorithms. ASIC chips are designed for extremely specific purposes, so 16 different mining algorithms probably makes it effectively ASIC resistant. It might also drive away the people with ultra-high-power home mining rigs – think 100 video cards stacked up – because the power at their disposal and the unpredictable returns mean their effort is better spent on more valuable coins. Overall, Ravencoin might be an attractive proposition for small-fry miners.
OPINION: Overstock.com's multi-million dollar investment in Ravencoin sounds like an investment in the team behind it and in the long-term success of the project. This might be much less clear than its benefit for miners.
ASIC resistance and a fancy mining algorithm can empower a coin by encouraging decentralisation and stability, but it's not a practical application per se. While Ravencoin's X16 mining algorithm might be unique, ASIC resistance in itself is a very common feature found in many coins. Some might argue that proof-of-work algorithms, such as those used by Ravencoin, are already out of date and that more energy efficient proof-of-stake systems, hybrid models and other variations are the natural next step.
Ethereum, for example, is planning to switch to proof of stake to help solve its scaling problems and manage the network more efficiently.
The end-game use case of Ravencoin, according to itself, is to transfer digital proof-of-asset ownership along the blockchain.
"In the fictional world of Westeros, ravens are used as messengers who carry statements of truth. Ravencoin is a use case specific blockchain designed to carry statements of truth about who owns what assets," it explains.
The whitepaper is entirely dedicated to the X16 mining algorithm, and doesn't go into any detail about what exactly this means. But on the surface, this doesn't sound like an especially taxing application of blockchain technology. In some respects, the transferring of ownership is exactly the same thing as sending coins over the blockchain, which is perhaps the most basic function of any cryptocurrency.
At this stage it's not clear whether Byrne sees something in Ravencoin that no one else does, or whether he once woke up down a couple of million dollars after meeting the developers in a bar.
The general sentiment seems to be that buying Ravencoin would be a pretty big leap of faith. Right now, Ravencoin probably deserves its non-existent market cap, but the crows aren't circling yet and the miners are still having fun playing with the X16.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC and XRB.