We have gotten a few emails about the sharp decline of our payout rate recently. It's not intuitive that our payout rate per hash would decline, while prices for Monero are falling as well. We'd like to explain in detail what exactly is going on.

If you know a bit about Mining in general, you can skip over the first few paragraphs.

The way Mining for Monero and other Cryptocurrencies works is that you try to find a solution to a mathematical problem. The problem is entirely artificial: find a hash value that has *n* leading zeroes with the the last block as one of the inputs. For Monero, the solution is tested with a hashing algorithm called *CryptoNight*. Since there is no way to go back from a particular hash to the input value, you have try to find a solutions by *brute force*.

`CryptoNight(last_block_hash + nonce) = new_hash`

The objective is to find a valid `new_hash`

– a hash that has a certain number leading zeroes. The `last_block_hash`

value is fixed. The only thing you are allowed to change is the `nonce`

. A miner will randomly test different nonce values until it finds one that produces a valid hash. If you find such a hash, you are allowed to create the next block in the blockchain and will earn a reward.

If, in the meantime, another miner has found a valid hash and has created a new block, you have to start over with a new `last_block_hash`

.

The number of leading zeroes your hash has to have is called the *difficulty*. The more leading zeroes that are required, the more random nonce values you have to try.

Monero is tuned so that on average the whole network of all miners worldwide will find a valid hash every two minutes. If there are more miners participating they collectively can test more nonce values in this two minute span. Monero therefore adjusts the difficulty to keep this block time constant. That is: more miners = higher difficulty.

Coinhive pays you per hash. The payout is the same wether the hash is a valid one (satisfies the difficulty) or not. The payout is also independent from the actual number of blocks we can create and the rewards we earn.

Instead, the payout rate is based on the mathematical average of the reward that we *should* earn. We don't adjust this rate by hand. It's re-calculated every few hours, based on the current difficulty of the Monero network and the average block reward.

`payout_rate = (hashes / global_difficulty) * block_reward * 0.7`

This is somewhat different from a traditional mining pool that will only pay you if they really find a block.

Typically, the more popular a Cryptocurrency gets, the higher the price for it will get *and* the more miners will be attracted. Remember: more miners means a higher difficulty.

In the last few weeks, the price for Monero has risen quite a bit…

…but so has the difficulty

Notice how in the last few days the difficulty continued to rise, while the price per XMR declined sharply. The truth is that all Cryptocurrencies have fallen in value quite a bit in the past few days. Monero is no expection.

The miners however are here to stay. Many people have invested greatly in mining hardware and they continue to mine Monero even when the prices fall. It's unlikely that the difficulty will decline anytime soon.

If we calculate the payout per hash in terms of USD value, you can see that we payed quite a bit more in Nov.-Dec. 2017 than we did in Sep.-Oct. 2017.

So, while our payout rate in XMR has steadily declined since we launched Coinhive back in September 2017, the USD payout has actually increased for the most part. Now, with the falling prices of Monero, we're back at Oct. 2017 levels.

As you can see, the payout rate is not entirely in our hands. Yes, you're earning less right now than you did a month before, but so do we. We're all in the same boat. Of course we cannot predict the future, but if we have learned anything from the past, it's that prices will rise again.

Don't panic.

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posted on February 01, 2018,
the Coinhive Team
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