Mining contracts - the new ponzi

[ghur]

Hello everybody,

I certainly do not hope that all of them are a fraud. I just bought 1 TH/s at http://pbmining.com?ref=iflash11 and I do hope it was not a foolish investment.

@Piggles: I absolutely hear you (I read your word slinging match with one of their admins). But unless the site suddenly disappears we will only know if they are legit if somebody tries to make some money with them. I try this now. And I will keep people posted here.

Ahhh, btw: Everybody can see my stats here (I am user #2332): http://pbmining.com/?p=stats

So everybody can follow how I am doing. Maybe I just threw a couple of grand out of the window but my gut feeling tells me: I did not. Still, that does not mean that I will generate revenue. It depends also on how difficulty develops among other things.

Let's see …

Best


iFlash

You should have read their thread. It's a ponzi.
They're overly defensive, use bullshit reasons to hide their identity and refuse to give any proof there is actually a farm.

They've been outed several times so far and have never provided any satisfactory answers to reasonable questions about their legitimacy.
But apparently people don't care and keep throwing their cash at them, because "they paid me, so must be legit".
Because clearly getting paid 10% of your investment over time means you're not going to lose out on the remaining 90%.

[Hunterbunter]

are there any legit ways to hire hashpower on my own pool?

[iflash]

You should have read their thread. It's a ponzi.
They're overly defensive, use bullshit reasons to hide their identity and refuse to give any proof there is actually a farm.

They've been outed several times so far and have never provided any satisfactory answers to reasonable questions about their legitimacy.
But apparently people don't care and keep throwing their cash at them, because "they paid me, so must be legit".
Because clearly getting paid 10% of your investment over time means you're not going to lose out on the remaining 90%.

You might be right. You might be wrong. I simply don't know and I think as of today nobody can say for sure where the truth lies.

But I will see in coming weeks what's going on. In about 12 weeks I can say for sure whether this was a bad idea or not. By that time I should have mined enough coins to have the investment cared for.

The point that I "worry" much more is: Probably by that time (in 12 weeks), my hashing power of 1 TH/s won't be good enough for generating any significant profit on top of the coins mined to pay for the investment.

It all depends on how the difficulty changes over the next 3 months.

I might be lucky. I might not be lucky.

It's a bit of a casino.

[irrational]

Please stop using the term "ponzi" if you have no clue what it means...

It's true that most of these mining sites are risky, and even the more legit ones ARE NOT for newbies trying to make a quick buck.

Are you retarded?

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors"

This is what I am saying:

Fake mining operation takes money, pays back investors a small percent of their own money claiming it is "mining profits".

How is that NOT a ponzi?

But in this case you're not a new investor, you're a prospected customer. This IS different.

A scam, maybe. A Ponzi, no.

[MrPiggles]

But in this case you're not a new investor, you're a prospected customer. This IS different.

A scam, maybe. A Ponzi, no.

lol you make no sense

[irrational]

But in this case you're not a new investor, you're a prospected customer. This IS different.

A scam, maybe. A Ponzi, no.

lol you make no sense

At least you're in good humor about it :-)

Customers are not investors. Investors are share holders. Customers and investors play entirely different roles in an organization.

A Ponzi scheme is a type of scam that defrauds investors.

If I overlooked where you were investing in this company, I apologize.

[MrPiggles]

But in this case you're not a new investor, you're a prospected customer. This IS different.

A scam, maybe. A Ponzi, no.

lol you make no sense

At least you're in good humor about it :-)

Customers are not investors. Investors are share holders. Customers and investors play entirely different roles in an organization.

A Ponzi scheme is a type of scam that defrauds investors.

If I overlooked where you were investing in this company, I apologize.

These people believe they are investing.

[iflash]

I have come to the conclusion that Mr. Piggles mission is merely to warn about a possible scam but bash people that don't follow his recommendation to not buy hash power from pbmining.com

I am hoping now for two things really:

1. That I will have my money back home in two to three months with pbmining still in business.

2. Having a great laugh at this discussion here.

[jayson001]

It's really quite simple. Don't ever send money (for any reason) to anyone you don't have good reason to trust. And with that ends almost all (if not all) of these "mining" operations.

Agreed.

[phillipsjk]

Fake mining operation takes money, pays back investors a small percent of their own money claiming it is "mining profits".

How is that NOT a ponzi?

I found myself making a similar mistake several weeks ago.

Somebody claimed disk capacity prices were dropping "exponentially", and I accused them of not understanding what the word "exponential" means. The word is mis-used so often that I start to assume it is always used incorrectly. In fact, disk capacities have gone up exponentially, while prices have remained relatively flat.

In this case, no Bitcoin is not a Ponzi; but it is very possible that these "mining" operations are.

are there any legit ways to hire hashpower on my own pool?

This is a very good question. Even if these "hashpower for hire" outfits have the hash-power, it is dangerous to simply trust them with building blocks on the Bitcoin network. Hashers are not miners, and Bitcoin network doesn't need them.

[MrPiggles]

I have come to the conclusion that Mr. Piggles mission is merely to warn about a possible scam but bash people that don't follow his recommendation to not buy hash power from pbmining.com

I am hoping now for two things really:

1. That I will have my money back home in two to three months with pbmining still in business.

2. Having a great laugh at this discussion here.

I'm not bashing anyone, i came to this forum primarily because I wanted to join PBmining, and all I got was accusations of initially being a shill for them, and then people accusing me of not understanding what the word ponzi means, both of which are patently untrue.

[MrPiggles]

Fake mining operation takes money, pays back investors a small percent of their own money claiming it is "mining profits".

How is that NOT a ponzi?

I found myself making a similar mistake several weeks ago.

Somebody claimed disk capacity prices were dropping "exponentially", and I accused them of not understanding what the word "exponential" means. The word is mis-used so often that I start to assume it is always used incorrectly. In fact, disk capacities have gone up exponentially, while prices have remained relatively flat.

In this case, no Bitcoin is not a Ponzi; but it is very possible that these "mining" operations are.

Indeed, I don't quite understand the multiple accusations of misusing the word.

Charles Ponzi set up a company which claimed to make huge profits off arbitrage on international return coupons. I suppose all the people who believed they were "investors" were really "customers" since they were prospected and therefore Charles Ponzi wasn't running a Ponzi either.

[cloverme]

Being a miner myself, I don't think mining was designed at it's heart to be a ponzi. That being said, there are some interesting parallels that can be applied, some out of context (admitted). 

So, if you take the principals of a ponzi from wikipedia...

"The promoter vanishes" - Satoshi (although, nothing is paid to Satoshi from miners)

"requires a continual stream of investments to fund higher returns" - As difficulty rises, you have to purchase more GH/s to continue to earn or get a higher return.

"External market forces, such as a sharp decline in the economy (for example, the Madoff investment scandal during the market downturn of 2008), cause many investors to withdraw part or all of their funds" - The collapse of Silk Road and Gox....

"A Ponzi scheme claims to rely on some esoteric investment approach and often attracts well-to-do investors" - Buy mining equipment as preorders which half the companies are running scams. There are legit companies though, but we've all seen the scams.

"In a Ponzi scheme, the schemer acts as a "hub" for the victims, interacting with all of them directly." - The blockchain and bitcoin network? 

Anyway, I just thought these were interesting in light of the topic. I personally don't think it's a ponzi, I'm a supporter of bitcoin and believe it will revolutionize the future of online transactions. I think we are in the very early stages of mining and bitcoin itself.

 

[ghur]

I think several people in this thread are mistaking this thread for an accusation against bitcoin and mining in general.
But rather, it's a remark regarding the rise of "companies" claiming to sell mining contracts.
However, instead of actually mining bitcoin, these companies rather use a ponzi scheme using the investment made by users to pay them out in order to fake legitimacy.

This practice doesn't have much to do with bitcoin itself and mostly just relies on how long it takes for investors to see ROI.
This leaves them plenty of time to pull more "customers" into their scam, before ultimately disappearing into anonymity.
It's a very low risk setup for them and requires only minimal effort. Customers will provide all the funds they need to keep up the sham for months on end.

Any company going to great lengths to hide their identity while claiming to provide a legitimate service shouldn't be trusted.
The most likely scenario is they need the anonymity to disappear after having suckered a sufficient amount of people into the scam.

[MrPiggles]

I think several people in this thread are mistaking this thread for an accusation against bitcoin and mining in general.
But rather, it's a remark regarding the rise of "companies" claiming to sell mining contracts.
However, instead of actually mining bitcoin, these companies rather use a ponzi scheme using the investment made by users to pay them out in order to fake legitimacy.

This practice doesn't have much to do with bitcoin itself and mostly just relies on how long it takes for investors to see ROI.
This leaves them plenty of time to pull more "customers" into their scam, before ultimately disappearing into anonymity.
It's a very low risk setup for them and requires only minimal effort. Customers will provide all the funds they need to keep up the sham for months on end.

Any company going to great lengths to hide their identity while claiming to provide a legitimate service shouldn't be trusted.
The most likely scenario is they need the anonymity to disappear after having suckered a sufficient amount of people into the scam.

Thank you for explaining this.

I thought I was missing something, I didn't realise they were missing the point entirely and thinking I was attacking bitcoin mining in general.

This thread is about a few mining firms which are scams, not mining in general. I thought that was quite clear.

[elysid]

Maybe if you said "mining contracts, the new ponzi", it would be clearer. 

As for mining hardware sellers that claim ROI in a set period of time... ehh... it would be nice to be told about projected difficulty increases, but it is bitcoinland where you gotta do a lot of homework. 

The way I see it?  When buying the hardware, you don't necessarily have to mine for bitcoin.  At the moment I don't think that there are any better options for SHA-256 coins when it comes to mining, but who's to say that it won't change as ASICs potentially become more ubiquitous?  You're buying a SHA-256 ASIC, ready for what could be the equivalent to scrypt's dogecoin.  Or you don't care to mess wif any exchanges, or you want to support a SHA network of your own, like Mazacoin...

sorry if I missed the point also, though. q_q

[MrPiggles]

Maybe if you said "mining contracts, the new ponzi", it would be clearer. 

Yeah I have a weird habit of reading threads rather than just the title. lol

[MrPiggles]

Changed thread title.

[cloverme]

Sorry, I did miss that point on the thread, but have been following the thread on pbmining and whether it is a scam or not.

I don't think all mining-as-a-service companies are scams, but I do think several of them bank on the fact the newbie is not well informed about mining in general. Case in point, the 5 year deal that pbmining offers, what value are gh purchased today going to be worth in 5 years? Most hashing power purchased today declines rapidly in effectiveness towards an ROI. The only way that would change is if difficulty fell, which I don't see happening in the future at all.

So I think companies like pbming are banking on that, raising capital through sales quickly to fund the purchase of more hardware to fund more sales, rinse, and repeat. I don't think that's a sustainable business model. If anything, it's a pyramid model...

There's another thread here where a mining company looks like a ponzi, it sold bonds (LabRat) and then decided to change the payout structure per bond. Well, as you can imagine, everyone is flipping out because it turned a bond into something nearly worthless.  Check it out https://bitcointalk.org/index.php?topic=251423.3720

[ghur]

Sorry, I did miss that point on the thread, but have been following the thread on pbmining and whether it is a scam or not.

I don't think all mining-as-a-service companies are scams, but I do think several of them bank on the fact the newbie is not well informed about mining in general. Case in point, the 5 year deal that pbmining offers, what value are gh purchased today going to be worth in 5 years? Most hashing power purchased today declines rapidly in effectiveness towards an ROI. The only way that would change is if difficulty fell, which I don't see happening in the future at all.

So I think companies like pbming are banking on that, raising capital through sales quickly to fund the purchase of more hardware to fund more sales, rinse, and repeat. I don't think that's a sustainable business model. If anything, it's a pyramid model...

There's another thread here where a mining company looks like a ponzi, it sold bonds (LabRat) and then decided to change the payout structure per bond. Well, as you can imagine, everyone is flipping out because it turned a bond into something nearly worthless.  Check it out https://bitcointalk.org/index.php?topic=251423.3720

Given the answers received from pbmining when asked reasonable questions about their farm, I'm convinced there absolutely isn't a farm and payouts are not the result of bitcoins being mined.

Many users do understand the service companies are claiming to offer, there just are several companies out there (like pbmining) that aren't actually offering the service they claim to provide.
The accusation towards these companies isn't from the lack of understanding their service, but rather from the lack of even remotely plausible evidence being provided by these companies regarding the existence of their farm.