Abstract
Mining application-specific integrated circuit (ASIC) is an essential facility for mining in Proof-of-Work (PoW) based blockchain systems. This paper regards ASIC as a financial asset and proposes a theoretical estimate of the pricing of ASIC. We show that the payouts from ASIC can be replicated by an integral of European call options. Hence, the value of ASIC is increasing in the volatility of the cryptocurrency price. Our results imply that miners may prefer to keep the high volatility to maintain the value of their ASIC; thus, they may refuse the proposals and innovations for stabilizing the price. In this sense, the high volatility of the PoW-based cryptocurrency price might be intrinsic.
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