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For stocks, it can cease to exist due to the firm's bankruptcy or merger.

If possible, when and why can a cryptocurrency cease to exist? For example, is it possible for Bitcoin to suddenly become value $0 at some point?

I am actually looking for a technical answer. A fiat money becomes worthless when the government that backs the currency becomes very high credit-risky and et cetra or if no one believes the government can pay the IOUs. This argument applies to a cryptocurrency as well. But I am looking for a technical-type answer that involves system-failure, mining cost, and the like.

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    I'm voting to close this question as off-topic because it isn't about personal finance. For technical questions about cryptocurrency, please see bitcoin.stackexchange.com. – Chris W. Rea Apr 2 at 21:05
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    @ChrisW.Rea That site is specifically not for questions about cryotocurrency generally. It is for Bitcoin. As for this site, it "is for people who want to be financially literate, find ways to save money, minimize taxes, invest wisely". Wanting to understand how an asset class can lose all its value seems very much on-topic for being financially literate and investing wisely. Cryptocurrencies are only off-topic if they "have no bearing on personal finance". – JBentley Apr 3 at 12:52
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    @user41790 There is no such thing as "the exchange" when it comes to cryptocurrencies. Also note that several exchanges have done exactly that, but the concept of cryptocurrency continues to be popular. – JBentley Apr 3 at 12:53
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    @TylerH Even for a given specific cryptocurrency, there is no such thing as "the exchange", nor is it at all necessary to store the currency on an exchange. There is nothing to stop you setting up a website right now which swaps a cryptocurrency for cash, and call yourself an exchange. The entire point of cryptocurrency is that they are distributed and non-centralised. If an exchange gets burgled and people have voluntarily chosen to store coins there then all that happens is that those people lose their coins. The coin itself is unaffected. It's no different than if a bank gets robbed. – JBentley Apr 3 at 13:55
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    @TylerH It only changes the value if the theft causes a loss of trust in the currency itself (e.g. it reveals weaknesses in the system). Otherwise, the value of the stolen coin remains the same. The thief can sell it for the same price that the rightful owner would have got (ceteris paribus). The customer doesn't change his valuation to zero, he simply doesn't own it anymore. If your car gets stolen from you, the car isn't suddenly worth $0, notwithstanding that you no longer have it. OP wants to know when a coin will fall to $0. That won't happen simply because someone else's coin got stolen. – JBentley Apr 3 at 14:14
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When the network lacks sufficient processing power to protect against attack

Take a look at CoinYe (West). There have been no trades since 2017 and the currency is considered defunct. Essentially Kanye West sued them for using his name and likeness, and the original developers dumped their coins.

Interest waned and the network lost 99% of its processing power, and the coins lost essentially all of their value.

Remember, cryptocurrencies count on the built in redundancy of thousands or millions of independent servers, each run by someone who holds that currency and wants it to be as secure as possible. If you don't have a critical mass of investors, then it's pretty easy to orchestrate a 51% attack such as the attack on Ethereum

To drive this point home even further, crypto51.app has listed prices per hour to perform 51% attacks on most cryptocurrencies.

EDIT:

A commenter mentioned "Loss of Quorum" - this is the technical way of saying there are not enough 3rd party observers to validate any future transactions.

All cryptocurrencies work by having 2 entities announce their transaction in public (the internet). If it were in English, it would sound something like I Jack, would like to give Jill coin #723.

The 3rd party observers all pull out their ledgers and look. Jack owns coin #723 so this is legit. Over the next little while they confer with each other and all agree Jack really did own coin #723 and gave it to Jill. They all add this transaction in their ledgers.

If only "a few" of the observers disagree, they are shouted down by the rest of the observers and agree to change their ledgers.

That last sentence is the key to understanding attacks

Now for the 51% attack - Jill has a majority of the 3rd party observers in her pocket. She decides to sell coin #723 to Bob, Ashley, and a whole bunch of other people. She can get away with this because her gang of 3rd party thugs is larger than the rest of the group put together, and they will convince everyone she only spent the coin once, when in fact she spent it multiple times.

Jill has a short window to "double spend." It won't be too long before all the duped people start talking and realize that Jill has the town in her pocket, and simply stop accepting coins as payment. All that's left are the criminal scum who agreed to rig the system to begin with.

This leads to a Loss of Quorum. Essentially when none of the 3rd party observers trust each other enough to agree on anything. Even if one or two new people join in, they don't have the critical mass of observations needed to ensure the integrity of the system, and the whole thing falls apart.

In this example Loss of Quorum is when there are not enough 3rd party observers to "shout down" the hold hold-outs with a unified narrative of what happened.

EDIT 2: Why this doesn't happen more often

Some commenters have pointed out that the market capitalization is worth a lot more than the cost of a 51% attack, so why aren't these occurring everyday?

Mainly because an attacker really only has one shot at this. They've got to first hoard as many coins as possible, then attack and covert those coins to cold, hard, cash. The market for digital currency, especially lesser know ones, is only so big, and finding buyers and doing the transaction takes time. All this time eats into the profit.

The market is open, so players will notice someone is suddenly unloading a lot of coins all at once, which will raise suspicion. Once an attack is suspected, people will simply stop buying coins until things are sorted.

Now the attacker, who either bought coins, or spent a lot of time mining them, is stuck with whatever he couldn't unload. The attack also drove down the value significantly, probably to $0.

The attacker has to guess just right. Too many coins and they'll be left holding a lot of worthless digital currency. Too little and the attacker doesn't get a large enough pay-day to cover cost and risk.

It also looks like some people are doing 51% attacks to draw attention to the issue https://bravenewcoin.com/insights/attacker-pledges-to-make-51-percent-attacks-a-spectator-sport

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    This is essentially the correct answer (loss of quorum), but a more general answer would also mention networks that cannot process transactions anymore due to a similar loss of quorum. – MSalters Apr 3 at 10:53
  • Thanks for the response. When you say the "attack", can you provide some background or reference material that I can read? I am not familiar about the attacks. – Frank Swanton Apr 3 at 14:14
  • The cost of a 51% attack on BitcoinGold is only $440/hour? That's hilarious! – Michael Apr 4 at 7:22
  • @Michael - yep. Unless you're one of the top 10 your cryptocurrency it's a pretty low bar. – sevensevens Apr 4 at 22:29
  • It makes me seriously wonder why there aren't more 51% attacks... seems like easy pickings for bad actors with an itch for illicit gains. – Michael Apr 5 at 0:46
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Cryptocurrency has no value. All that a bitcoin is is evidence that someone criminally wasted a huge amount of electric power to produce it. What you get for it is what someone is willing to pay for it. It is entirely based on the “greater fool” theory - you’d be a fool to buy it, but you hope to find a greater fool to sell it to.

It will lose its value when nobody is willing to pay anymore.

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    Stupid question : what's the difference with stock exchanges, then? What's the added value of high frequency trading? They also use a huge amount of electric power. – Eric Duminil Apr 3 at 11:45
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    This argument applies pretty equally well to fiat currencies, which also have no value. -1. – Michael Hampton Apr 3 at 11:48
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    Stocks are valuable because they pay dividends (and occasionally other money). Fiat currencies are valuable because they can be used to pay taxes, and because of the huge amount of pre-existing debt denominated in fiat currencies. But as I understand it, cryptocurrencies like Bitcoin are considered valuable almost purely because of the "greater fool theory". – Tanner Swett Apr 3 at 12:11
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    Stocks are real certificates of ownership; bonds are certificates of debt. While both are subject to a risk of not paying out, they do correspond to real ownership. – pjc50 Apr 3 at 12:29
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    -1, this answer is fundamentally wrong. "Cryptocurrency has no value" and "What you get for it is what someone is willing to pay for it" are entirely contradictory statements. The value of any asset is what someone is willing to pay for it. I hope you don't own any real-world currency, because if so you are a "fool" according to your own standards. – JBentley Apr 3 at 13:09
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When mining costs exceed the immediate revenue to the miner, mining will decrease (it may still continue for a short while if a mining cohort owns enough of the crytpo that they want keep afloat and offload before the whole thing collapses). Given that Bitcoin can only mine a new block based on a number of miners determined by previous mining activity, if such a decrease / stoppage occurs at the 'wrong time', it may never start back up again (because why would someone waste significant money burning power on Bitcoin when they could just take the code base and start up a new Bitcoin3-HyperBitcoin?).

Keep in mind that this is the risk of putting money into an object with no true value - if you buy it in order to sell it, and everyone only buys it to sell it, then the music stops when the market collapses, and you can quickly be left with nothing. You act like collapse of a crypto currency is no more likely than collapse of a country, but that is very naive. If the USD becomes worthless, there's a pretty good chance there won't be an internet, and there won't be crypto then, either. Whereas hundreds / thousands of crypto currencies have come and gone without putting any country's economy at risk.

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