Bitcoin Miners Bail, While Cryptocurrency Capitalization Drops 83% Since January (coindesk.com)

"Bitcoin miners hit hard by the cryptocurrency's crash may be throwing in the towel," reports Bloomberg: The Bitcoin network's hash rate, one way of gauging the computing power dedicated to mining the digital currency, dropped about 24 percent from an all-time high at the end of August through Nov. 24, according to Blockchain.com. While the decline may have partially resulted from miners switching to other cryptocurrencies, JPMorgan Chase & Co. says some in the industry are losing money after Bitcoin's price tumbled. "This suggests that prices have declined to a point where mining is becoming uneconomical for some," JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a Nov. 23 report, in reference to the falling hash rate...

The break-even cost to mine a single Bitcoin using Bitmain's Antminer S9 rig was estimated at $7,000 in a Nov. 16 report by Fundstrat Global Advisors, though the level is probably lower for some miners with access to cheap electricity and equipment... A big miner shakeout could be bad news for chipmakers including Taiwan Semiconductor Manufacturing Co. and Nvidia Corp. who supply the industry, along with mining-rig designers like Bitmain Technologies Ltd. that are pursuing initial public offerings.
The price of bitcoin dropped 37.4% just in the month of November -- its worst monthly decline in seven years, since August 2011 when it fell from roughly $8 to $4.80. And the decline in bitcoin also dragged down 24 of the top 25 largest cryptocurrencies, reports CoinDesk. "What's more, the average performance of the top 10 cryptocurrencies by market capitalization was -30 percent, while the average performance of all 25 was -37 percent..."

"The total capitalization of the cryptocurrency market has now lost over $690 billion and 83 percent of its value since reaching its all time high north of $820 billion this past January, according to CoinMarketCap."

Comments

Why Bitcoin has a maximum Flux

[goombah99]

Not all Cryptocurrencies are doomed, but All cryptocurrencies based on "proof of work" are doomed. Here's the analysis.

The sole purpose of proof of work is to make a double-spend impossible in a distributed (no centralized authority) system. In a distributed system, multiple ledgers might exist so the rule is the longest blockchain ledger trumps any other. With this rule the only way a cheater can spend a coin, get the benefit of the transaction, then after the fact erase the expenditure from the transaction is if they can using their own CPU power extend the pre-spend ledger faster than the post-spend ledger is being chained by the collective cpu power of the community. This is often dubbed the 51% attack. In real life it take more than 51% or a dose of good luck to make it work, but 51% is a good name for it.

No DISTRIBUTED cryptocurrency can exist if it does not solve the double spend problem. Many use proof of work.

How does proof of work do this? Well it doesn't work if the cost of getting 51% of the collective CPU power is less than the profit you can make by re-writing the ledger successfully.

Proof-of-work therefore has to adaptively adjust the cost of doing that so that the amount of money being transacted is always less than the cost someone wold incur for confidently performing a 51% attack.

You can imagine a lot of ways of doing that adaptation, bit coin has an approximate one built into it's growth rate and hash rate.

How good the approximation is, is less important than the bottom line: No cryptocurrency can survive long term if it is vulnerable to a 51% attack, and so the proof of work cost must grow with the transaction volume.

This means the costs of operating any system based on that principle is doomed to collapse in heat death as it grows beyond practical size.

If you want to have a viable cryptocurrency, then you need to come up with some clever system that impairs the double spend problem without proof of work. Alternatively you need to rig things so that the 51% attack does not scale lineary with the number of CPUs you have. (this might be rule based such as voting cheaters off the island, but that particular solutions isn't it because it just moves the problem somewhere else not solving it)