The troubled but growing market of crypto mining in lieu of payment

Whether or not cryptocurrencies will ever replace traditional cash, there's one clear way to make money from it: mining.

This process uses extensive computer resources to verify and record cryptocurrency transactions on a public ledger — and the miner is typically rewarded by receiving fees and/or some amount of the currency itself. But due to the power demands, there is a movement to delegate mining tasks to consumer-grade hardware.

Not all of the people driving this trend are honest about it. Many hackers have sought financial gain from unsolicited “drive-by mining,” or using malware to take over a computer to harness its resources for mining purposes. But there is a less nefarious use for browser-based mining as a potential revenue stream to support digital content, allowing media outlets a third option beyond advertising and paywalls.

Bad reputation
While a relatively new phenomenon, cryptojacking has already made the headlines, with hackers embedding code into websites to enable mining. Much of this is facilitated by Coinhive, a company that has developed a JavaScript API that mines the currency Monero (XMR).

According to Coinhive’s website, “Users run the miner directly in their browser and mine XMR for you in turn for an ad-free experience, in-game currency or whatever incentives you can come up with.” Unfortunately, some have seen the potential for Coinhive’s solution to be used without the consent of those hosting or using the software. According to recent research, approximately 50,000 sites have been subject to mining malware, with over 80% of these using Coinhive’s script. In February, a cryptojacking attack in the U.K. infected over 5,000 sites in a single attack.

While cryptojacking isn’t as blatantly criminal as ransomware or viruses, it does monopolize the user’s computer processing power, rendering other applications slow and running the CPU of a computer red hot.

This side effect can impede even legitimate mining apps. This month, a Mac app called Calendar 2 added the option for users to devote their computing resources to mining XMR as an alternative to purchasing the software. The developer soon removed that option when it realized how resource-intensive it was, but the damage was already done — Apple chose to delist Calendar 2 entirely due to its strain on Mac resources.

That said, Calendar 2 made a very compelling case for crypto mining as an alternative to payment. In the three days it allowed crypto mining, the calendar app earned about $2,000 worth of the Monero currency.

The Salon experiment
Salon Media Group has been testing crypto mining for a month.

Online publishers in particular are having a difficult time generating revenue, and the pervasive use of ad blockers is having a material impact on advertising as a viable revenue stream. Juniper Research estimates that by 2020, ad blocking will cost publishers $20 billion. Between a rock and hard place, publishers are experimenting with whatever other available options are out there.

At Salon, opt in is explicit — a pop-up on visiting the publication's website asks the user whether they would like to disable their ad blocker, access paid content via the Salon app, or to allow mining to occur for the duration of their time on the site.

"The diversification expands not just in terms of subscription versus advertising — maybe there’s a diversification play around currency as a third dimension,” said Jordan Hoffner, CEO of Salon Media Group, in an interview.

While Hoffner admits that it’s early days and quantifiable metrics are not yet available, he sees the initiative as net positive.

“Are people opting in? Yes. Are people coming back? Yes. Are there more than when we started? Yes," Hoffner said. "The question is how do you get a lot bigger, and that’s what we’re trying to figure out.”

Return on investment
The crux of the problem is not just whether site visitors will embrace this model and give up CPU capacity in return for content, but whether the effort of mining is actually a worthwhile endeavor at all.

The value of currencies such as bitcoin has increased dramatically, and with it the ROI for investing in the requisite hardware to perform mining. However, there are technical limitations in browser-based mining that make Monero the most viable currency to mine at this time. Monero is currently at around $214, but it's clear that users won't volunteer to help mining if they don't get something of value in return.

If the Salon and Calendar 2 examples were to succeed, it would be because consumers spent enough time with their products to generate significant mining revenue.

Companies with less to offer get less in return.

According to a recent report, a campaign operator using Coinhive that ran on 11,000 websites for three months made just $7.69. One reason for this is that the sites were “parked domains” — sites that are bought just to serve advertising to accidental visitors. With an average visit of 24 seconds, this didn’t allow much time for substantive mining to occur. In that February U.K. attack, despite infecting over 5,000 sites, the perpetrator managed to mine only around $24 worth of Monero.

If browser mining is to be a worthwhile endeavor, then both adoption and scale will be critical factors in its success.