Why many more cryptocurrencies are using Scrypt algorithm

Why many more cryptocurrencies are using Scrypt algorithm

Many cryptocurrencies are now using the Scrypt algorithm and this has seen the Scrypt coins list getting bigger every day. Cryptocurrencies that are typically mined through computers use evidence-based algorithms. These algorithms are designed to make the cryptocurrencies prove that indeed a lot of computing power has been used to produce the coins. For example, Bitcoin uses the SHA-256 while alternative coins such as Litecoin and Dogecoin use a different system known as Scrypt. A major difference between SHA-256 and Scrypt is that Scrypt heavily relies on computing resources apart from the general processing unit, especially memory.

On the other hand, SHA-256 does not. What this means is that it is quite difficult for a Scrypt-based system to scale up. Moreover, it is difficult for such systems to use a lot of computing power. This is because the systems would have to utilize a relative amount of memory, which can be quite expensive. This is why many manufacturers are considering shipping Scrypt-based systems that will help to speed up the mining process and at the same time reduce power overhead. This is a huge advantage because this alternative algorithm for cryptocurrencies other than Bitcoin is likely to fuel the next digital currency arms race.

In fact, this arms race is already happening since the number of cryptocurrencies that use the Scrypt algorithm is over 480. Because Scrypt heavily relies on computing resources, it is always difficult for miners to run various instances of the algorithm in parallel especially in graphics card. This simply means that the cost of manufacturing Scrypt ASICs is higher compared to that of manufacturing SHA-256 ASICs. The reason why Scrypt coins list is getting bigger is that some companies are starting to produce hardware specially designed to mine Scrypt-based cryptocurrencies. 

The most important thing when it comes to mining cryptocurrencies is the general power efficiency given to the machine. By using high-quality machines, a miner is able to save a lot of money since the power efficiency increases by 300%. The current cryptocurrency mining units use FPGA (Field Programmable Gate Array) chips. These units deliver poor power efficiency making it difficult for Scrypt-based miners to mine more cryptocurrencies. But given the requirements for mining these currencies, power is not generally the only key parameter.

Another key parameter is memory. Memory bandwidth is crucial as it is a simple function of the number of IO (input/output) pins that exist on a chip. The problem most new miners face is that they cannot afford to buy high-quality mining equipment. This squeezes the small players out since mining cryptocurrencies is essentially an arms race. But despite this, many more miners are mining Scrypt-based cryptocurrencies and the reason why the Scrypt coins list contains hundreds of new cryptocurrencies.

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