ASICs are a contentious topic in the cryptocurrency mining community, and are sure to stir up a debate whenever they are mentioned. The term ASIC means Application Specific Integrated Circuit, and refers to a microchip that has been designed to perform a highly specific task.
Certain cryptocurrencies such as Bitcoin (BTC) have come to terms with ASICs, which now dominate its hashrate. Several other proof-of-work cryptocurrencies such as Monero (XMR), however, are actively trying to limit the effectiveness of ASIC miners due to concerns about centralization – since they are more of a niche product, ASICs are more costly to obtain than GPUs, meaning that less people are able to engage in mining profitably.
When an ASIC developed to mine a specific coin is introduced, it tends to replace the GPU solutions, which are usually used by many small-scale miners, as ASICs offer hyper-efficient cryptocurrency mining compared to GPUs, which are consumer-grade computer hardware.
Both GPU and ASIC systems are widely used, as both options offer distinct advantages and drawbacks. The GPUs are flexible and can be employed to mine a variety of different cryptocurrencies, and their relatively low cost has increased the accessibility of crypto-mining. The ASICs are designed with a very specific task in mind, even though they require a bigger investment and do not offer the flexibility of GPU powered systems, they make up for it with drastically increased efficiency and speed of mining.
In general, ASICs will improve the security of a blockchain network in terms of hashrate, but might introduce centralization-based risks if mining becomes too inaccessible to the average user.
The difference between the two chips is in their inherent design. GPUs have many instruction sets and libraries that allow them to operate on locally stored data. They basically act as accelerators for parallel-working algorithms and are very efficient at performing matrix operations, which makes them fast and flexible.
Their multi-purpose design makes GPUs a safe investment despite their slower mining speed, since they can be sold to recuperate a part of an original investment once the mining becomes unprofitable.
ASIC chips, on the other hand, are expensive to manufacture and maintain as they require a great effort to be made and timely technical upgrades to stay operational. Once the ASIC system becomes obsolete it has no, or very low resale value since it cannot be re-purposed for another computational task.