End of an era? Coinhive shuts down, may take cryptojacking with it

Posted: 5 March 2019 1:08 pm

Coinhive's closure is a mostly symbolic brick on the road to crypto mining institutionalisation.

Coinhive will be discontinuing its service on 8 March, it recently announced.

Coinhive is/was a browser-based crypto-mining platform. It's a piece of software you can/could put on web pages so visitors to the site start mining cryptocurrency – specifically Monero – through their computers.

"It has been a blast working on this project over the past 18 months, but to be completely honest, it isn't economically viable anymore," the team said.

This is a significant development given the impressive browser-based crypto-mining market share commanded by Coinhive right up until the end. But even with that market share, it couldn't make browser-based mining worthwhile.

Bad numbers

As of mid-year 2018, Coinhive was responsible for 1.18% of Monero blocks mined, equating to $250,000 of XMR per month. Coinhive took a 30% cut of that, for revenues of $75,000 a month. Not bad, right?

But this dropped sharply as falling Monero prices, rising Monero hashrates, ad-blockers which prevented browser mining, and other factors all came together to wipe out browser mining profits.

This is how you can have headlines a month apart from each other saying "Coinhive is making a fortune (also we don't know how Coinhive works)" and "Coinhive's biggest users are only making pocket change".

All signs say browser-based crypto mining has been exceptionally unprofitable for a while now, and somewhere in the order of just of a few dollars a month, even for power users. Coinhive's eventual capitulation might just be a sign of the times in the crypto mining landscape.

The problem is that the economics of cryptocurrency mining are very, very tough, and introducing those economics to other systems isn't much of a step forwards. If you were actually running a mining farm in the last year or so, you were typically buffeted by big electricity bills, falling crypto prices and rising network hashrates which simultaneously reduce your profits while also meaning constant upgrading of your equipment.

Coinhive was a tempting proposition because it meant miners didn't have those electricity or equipment costs. So on paper it's free money, but even that couldn't work.

When free money is unprofitable

Despite abuse, Coinhive was mostly envisioned as an alternative to advertising, and a way of raising funds for good causes.

The idea was that you can stick an innocuous mining script on your web page to siphon off a little bit of computing power from users instead of showing ads. Similarly, charitable causes can raise funds from people as easily as directing them to a web page where their computing cycles go to a good cause.

The problem is that the free money isn't free. In addition to the costs for the "end user" who's footing the energy bill, the actual operator either has to:

  • Risk losing site visitors, or supplant advertising with crypto mining.
  • Go to the trouble of maliciously injecting Coinhive around the Internet.

In the first case, you can still make more money with advertising, especially now that most ad-blockers also ward off browser-based crypto mining. And in the second case, there are typically more valuable applications for malicious code injections than a few cents worth of Monero.

It's now widely acknowledged that permanent ASIC resistance is not feasible for cryptocurrencies, which throws the future of GPU mining into doubt. And in the meantime, the GPU mining scene has also been locked up by big money.

In this respect, Coinhive's closure marks the end of an era by showing that even the most cost-friendly at-home mining can't be made worthwhile, marking another step on the inevitable-in-hindsight institutionalising of proof of work cryptocurrency mining.

Disclosure: The author holds ETH and XLM at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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