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Author Topic: BITCOIN CLOUD MINING IS A SCAM (noob word!)  (Read 6521 times)
FordPrefect
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July 08, 2014, 11:09:29 AM
 #81

Have you calculated reinvesting the dividends? Like on Cryptsy, you can buy fractions of a mining share.

So what if you reinvested the payouts on a weekly basis?

Theoretically you'd get exponential growth. Perhaps this would work? Could you do the math on something like this?

That would probably fix it.
The problem is: you will never then have BTC, you will only have GHs until the end of times.

Let's say you buy 1000 GHs.
These 1000 GHs after the first month give you 0.799 BTC.
You buy 0.799 of GHs (no matter how much it is).

Now you have 1000 GHs that will never catch up the investment, AND 0.799 of GHs that will never catch up the investment  Cheesy

I just trashed 150 Euro like an idiot, I can admit it.
But I wonder all those people in there with thousands of GHs... how comes they didn't make the count before buying so much of it?

I am not familiar with the service you are using, but on Cryptsy you can trade your mining shares back to BTC at any given time. So eventually, if you reinvest the dividends your 1 share will be 2, then 4, then 16, then 256. Or probably less because of the increase in mining difficulty.

But eventually, you could cash in these shares for BTC.

I calculated that if you reinvested the dividends on a weekly basis, after a few years you'd be generating like 1 BTC per day. Of course, this doesn't take into account the increase in difficulty, the decrease in share values, and of course the risk that Cryptsy gets Goxxed.

So as intrigued as I have been about mining, my experiences have only lost me BTC. The good news is that after a year I'll get my principal back, so it shouldn't be a loss...but I ain't gonna get riBTCh

But watch: if you cash back your BTC, somebody else is losing.
So, while you CAN do something by TRADING, you can't do anything by mining.
It's just another asset you are trading, but in general that asset value is nothing.
The only real winner is the cloud mining service.

That makes no sense. The assets that you've accrued are directly related to mining. Without the mining dividends being reinvested, you have no value beyond the principal.

So while cloud mining may not be great, your premise is flawed.

Let's say you pay 100 $ for 100 GHs for 5 years.
In the first year you recover 90 $ with those 100 GHs, and at the end of the 5 years you get up to... uh, well, 95 $, because after the first year the mining income becomes so small it's nearly nothing, thanks to the steady increase of difficulty of the mining process.

Let's say that after the first year you reinvest those 90 $ and buy 90 GHs (it doesn't matter if you do that month by month or week by week, the mechanism is PERFECTLY THE SAME).
After 5 years you still didn't get those 90 $ back. You will be at 86 $ or something. This because, again, mining difficulty increases and you don't reach what you invested.

And let's say that after the second year you reinvest that income of 86$ into 86 GHs.
At the end of the first year of this last investment you get back 80$, STILL LESS THAN THOSE 86$ YOU INVESTED. And after 5 years you will again get less than what you invested.

The result is: you will always have more and more GHs and never get back more BTC than what you invested.
It doesn't matter if you reinvest the BTC you earn from mining or you invest more BTC thanks to grandma paycheck for your birthday: they are BTC, and the GHs you buy with them does not give you back more BTC than what you put in.
But you are actually investing in GHs to get back more BTC than what you invest, right?

Now, I put here a couple examples, then that's all.
You can now buy 1 GHs on CEX.IO for 0.0068 BTC.
This is what you get back after one year (LOL): https://tradeblock.com/mining/a/6c9fc98920
CEX.IO has artificially pumped prices imho, and the only successful people in there are successful because they trade. But even then, there are commissions when you buy GHs or sell for BTC...

PBMining is much better: you can buy 1 GHs for 0.003 BTC at the moment.
This is what you get back after one year: https://tradeblock.com/mining/a/609bf460dc
0.01 BTC. Well, at least you are in active by a measure (if difficulty doesn't get another strange jump).

At this point the only thing you can dispute is the difficulty increase I have put in there.
But look, I didn't invent it, there is DATA about it, and the trend is not changing.
It has been an average of 18% on each step of 12 days in the past and this last step jumped to 25%.
DATA.
Now, you can HOPE the increase in difficulty will be less and everybody will get more BTC, but... that's just... hope.
Statistical data suggest otherwise.

Now, you can either understand this or you can't.
I warned you the way is possible to me to do so, I can't imagine a better way to explain what goes on, and I can't fight (and I don't want) people that WANT to believe something.
It's not even my right, or my duty.
I just talk about this because I feel I do good to people and, in last analysis, to Bitcoin.
I hope this can help you.


Let's assume for a second that your math is correct. CEX is still a much better value than pbmining.


(using your numbers, not mine)

Year 1
Invest $100
Earn/Reinvest: $90

Year2:
Earn/Reinvest: 80

So that puts the total value at $170. Remember, yes, CEX charges a commision, but its 0.2% so if you were to sell $200 worth of ghs the commision is $0.40 and if you can't turn at least 40 cents worth of profit then you're doing it wrong.  With PB mining, your math is actually about right since you can never get out of it what you put into it and at the end of your contract you can't just sell the GHS off to someone else, the GHS just disappears.

Personally, I buy hardware and use the proceeds to reinvest into cloudhashing at CEX, BECAUSE I can get it back out later. Essentially it becomes like a BTC savings account with a modest bit of interest.  (I've also done some investing in BTCJam, but have also lost money a few times there as well)
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GODLIKE
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July 08, 2014, 11:28:10 AM
 #82

Quote
Let's assume for a second that your math is correct. CEX is still a much better value than pbmining.


(using your numbers, not mine)

Year 1
Invest $100
Earn/Reinvest: $90

Year2:
Earn/Reinvest: 80

So that puts the total value at $170. Remember, yes, CEX charges a commision, but its 0.2% so if you were to sell $200 worth of ghs the commision is $0.40 and if you can't turn at least 40 cents worth of profit then you're doing it wrong.  With PB mining, your math is actually about right since you can never get out of it what you put into it and at the end of your contract you can't just sell the GHS off to someone else, the GHS just disappears.

Personally, I buy hardware and use the proceeds to reinvest into cloudhashing at CEX, BECAUSE I can get it back out later. Essentially it becomes like a BTC savings account with a modest bit of interest.  (I've also done some investing in BTCJam, but have also lost money a few times there as well)


Yes CEX has the advantage that you can reconvert your GHs into BTC anytime and yes, as you wrote, it's like having your BTC in bank, because they produce some interest over time.

But it's risky.
In example, I had 100 GHs in CEX and when I saw the new difficulty increase was 25% I sold immediately at 0.00716 and I was right: price now is around 0.00682 and I think they make it rise artificially thanks to bots.

It's totally possible that you can carve out some income by trading all time in there if you are skilled and with some luck, still, it's not income from mining.
And when I first joined CEX my thought was exactly like yours: "I put my BTC there to earn something instead than holding them in a cold storage".
No.
That doesn't work.
With each difficulty increase, your GHs value is going to drop and the other danger is: people open eyes and see they are just wasting money and GHs price will suddenly drop to hell and you will waste a lot of BTC value (that CEX will RETAIN).
In fact, at each given point in time, CEX has a huge amount of BTC for free, around 2 times the value, because of the overpriced GHs.
When GHs value will crash (because at some point people will open their eyes), they will keep the BTC, and people will remain with the real value of GHs, that amounts at less than half of what you can find GHs on their website now.

Under a point of view is like if your bank would tell you "give me 100$, and you get an interest of 0.1% the first month with decreasing rate of 40% each month, BUT YOU CAN TRADE ON PETROL!"
Fuck you, bank, thank you  Cheesy

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Fiftysven
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July 08, 2014, 11:33:29 AM
 #83

I invested some money into PB mining aswell, but i have arranged myself now with the thought it might not be worth it  Undecided a lesson to be learned i guess...
DannyElfman
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July 09, 2014, 02:51:24 AM
 #84

Let's assume for a second that your math is correct. CEX is still a much better value than pbmining.


(using your numbers, not mine)

Year 1
Invest $100
Earn/Reinvest: $90

Year2:
Earn/Reinvest: 80

So that puts the total value at $170. Remember, yes, CEX charges a commision, but its 0.2% so if you were to sell $200 worth of ghs the commision is $0.40 and if you can't turn at least 40 cents worth of profit then you're doing it wrong.  With PB mining, your math is actually about right since you can never get out of it what you put into it and at the end of your contract you can't just sell the GHS off to someone else, the GHS just disappears.

Personally, I buy hardware and use the proceeds to reinvest into cloudhashing at CEX, BECAUSE I can get it back out later. Essentially it becomes like a BTC savings account with a modest bit of interest.  (I've also done some investing in BTCJam, but have also lost money a few times there as well)

This analysis is flawed as the NPV of the GHs will decline over time as the amount of revenue they generate will decline over time to eventually reach zero.

This spot for rent.
FordPrefect
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July 09, 2014, 01:45:11 PM
 #85

You would think so, but because GHS are used as a mechanism for trading it can live almost in its own bubble. It's been between .0065 and .0075 per GHS since early April.  I'm not denying that the prices somewhat defy logic ...a diff increase of 20% *should* cause a fall in price of 20%... but it doesn't. As long as you can sell the GHS for a price that is greater than (original price*1.004)-mined income then you will profit.  - Moreover, you at least have the OPTION of liquidity... which is a better gig than a standard cloud mining contract since you can cash out whenever. (its how I bought my hardware)
xinzark
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July 09, 2014, 02:05:28 PM
 #86

You can sell them anytime why would you say its a scam .
FordPrefect
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July 09, 2014, 02:13:40 PM
 #87

You can sell them anytime why would you say its a scam .

The original post was regarding a fixed-time contract with pbmining, which (as far as I know) you can't sell off... and since you'll never get out of it what you put into it... is why its a bad investment (not sure scam is the right word, but definitely a bad investment)
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July 09, 2014, 02:16:03 PM
 #88

You can sell them anytime why would you say its a scam .

The original post was regarding a fixed-time contract with pbmining, which (as far as I know) you can't sell off... and since you'll never get out of it what you put into it... is why its a bad investment (not sure scam is the right word, but definitely a bad investment)

The buyer made bad decision and blame the company rather than themselves.

If bad investment is considered a scam, then all current batch of ASIC manufacturers should be considered scammers also.
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July 09, 2014, 02:18:44 PM
 #89

Don't know if I would call it a scam, but it sure is a bad investment.
Gargulan
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July 09, 2014, 02:54:20 PM
 #90

One thing people should be aware is this.

If ASIC mining is that profitable, all the ASIC manufacture won't be selling those machine and would rather mine themselves.
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July 09, 2014, 02:55:07 PM
 #91

http://www.thefreedictionary.com/scam

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DannyElfman
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July 09, 2014, 10:36:34 PM
 #92

One thing people should be aware is this.

If ASIC mining is that profitable, all the ASIC manufacture won't be selling those machine and would rather mine themselves.

The ASIC manufacturers need to sell their machines because they need funds for R&D and because they receive the entire payout from the machine right away instead of over time and not at a payout that is dependent on the network difficulty or the price of bitcoin

This spot for rent.
inBitweTrust
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September 03, 2014, 12:28:01 AM
 #93

Cloud mining is worse than a scam or bad investment because it actively encourages ASIC manufacturers to ruin the Bitcoin ecosystem through centralization.

Cloud mining isn't just a dumb investment but an attack on Bitcoin itself.

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September 03, 2014, 02:03:05 AM
 #94

Cloud mining is worse than a scam or bad investment because it actively encourages ASIC manufacturers to ruin the Bitcoin ecosystem through centralization.

Cloud mining isn't just a dumb investment but an attack on Bitcoin itself.
If there are enough cloud mining providers then it could leave the network somewhat more decentralized then prior to the entry of cloud mining.

Bitmantech also opened a cloud mining service today and they are in the process of transferring all their hashpower over to p2pool.
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September 03, 2014, 02:08:27 AM
 #95

If there are enough cloud mining providers then it could leave the network somewhat more decentralized then prior to the entry of cloud mining.

Bitmantech also opened a cloud mining service today and they are in the process of transferring all their hashpower over to p2pool.

Not decentralized enough. The physical location of miners need to be located and controlled in a decentralized fashion.

We are heading in the wrong direction otherwise.

Ideally we want users to also be miners in the future.

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September 03, 2014, 02:20:11 AM
 #96

Judging a scam by whether it is profitable or not is not conveinced.
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September 03, 2014, 02:27:29 AM
 #97

Judging a scam by whether it is profitable or not is not conveinced.

The scam is when ASIC manufactures intentionally use their client's "pre-order" investment capital to build a Cloud hashing infrastructure that they than use to resell hashing power to other clients or mine themselves while they continuously delay shipments with lies for excuses. 

This is indeed a scam and outright fraud.

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September 03, 2014, 04:09:53 AM
 #98

Judging a scam by whether it is profitable or not is not conveinced.


Of course is scam, what is then?

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September 03, 2014, 05:19:13 AM
 #99

If there are enough cloud mining providers then it could leave the network somewhat more decentralized then prior to the entry of cloud mining.

Bitmantech also opened a cloud mining service today and they are in the process of transferring all their hashpower over to p2pool.

Not decentralized enough. The physical location of miners need to be located and controlled in a decentralized fashion.

We are heading in the wrong direction otherwise.

Ideally we want users to also be miners in the future.
This will really not be possible due to the small number of blocks per day. More or less all users were miners in the very early days of bitcoin, however this eventually changed when the difficulty got to even modest levels.

The way things are going and how it will continue to go is people who own physical machines will point their mining capacity at pools in a semi-centralized fashion. Granted users can easily change pools that they mine on in the event that a specific pool acts in a less then honest or less then perfect way.

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