Cloudmining without proof of mining [poll]

[Tammy Chan]

^ The PBmining hashrate price is indeed at 0.0014 BTC / GHs now instead of 0.0021.

[jimmothy]

I can see u r affectionate towards BitFury and angry at PB Mining.

Angry is the wrong word. I just don't support their shady business model.

Moreover, one does not need to continue maintaining the same address to show they are mining. They can simply rent an address for a few days and show it as 'proof' for months.

That's not how it works. You cannot prove a company is currently mining by providing an address that is not currently mining.

Look at https://www.antpool.com/poolStats.htm . Every day new blocks are found and signed with "mined by antpool".

Regarding 'unknown entity', its a vague concept in bitcoin world. What will u do if CEX goes out of business tomorrow ? What u have been able to do to MK after the Mt. Gox fiasco. Everyone is always at risk and the concept of vague certainty should be abolished. While choosing the service I'll simply go through the rate chart and this is what I have now...

1. https://cex.io/ => 0.00268387 BTC/GHS

2. http://pbmining.com/ => 0.0021 BTC/GHS

3. http://www.cloudmining.website/ => 0.001 BTC/GHS

So basically what you're saying is that because there are so many scams, you might as well invest in the best priced offering regardless of how sketchy/untrustworthy?

Why would you willingly invest in something that has a 50/50 chance of being a ponzi? That's like playing roulette and betting on red, but instead of doubling your money if you win, you will maybe earn 10% profit after 6 months.

Just go to a casino where the risk is the same but the reward is 10 times greater.

[Snipe85]

Gaw has been in the cloud mining business for a while but has only recently started offering bitcoin cloud mining recently.

Did they offer cloudmining before hashlets? Hashlets have only been around for ~2 months.

You're wrong. They started selling hashlets in August. So it's more like 3 months, and they've been hosting miners before that.

https://www.cryptocoinsnews.com/gawminers-hashlet-sells-bitcoin-sales-per-day-overstock/

[jimmothy]

Gaw has been in the cloud mining business for a while but has only recently started offering bitcoin cloud mining recently.

Did they offer cloudmining before hashlets? Hashlets have only been around for ~2 months.

You're wrong. They started selling hashlets in August. So it's more like 3 months, and they've been hosting miners before that.

https://www.cryptocoinsnews.com/gawminers-hashlet-sells-bitcoin-sales-per-day-overstock/

Well since they started selling hashlets on August 16 it's more like 2.5 months. Either way it's nowhere near long enough for a ponzi to collapse.

[Johanna]

The cloud mining company don't want some competitor to come and cut their wires to reduce the difficulty.

[FattyMcButterpants]

Gaw has been in the cloud mining business for a while but has only recently started offering bitcoin cloud mining recently.

Did they offer cloudmining before hashlets? Hashlets have only been around for ~2 months.

I believe they were selling some form of cloud mining before they sold what they called 'hashlets' although IDR what they were calling it.

I vaguely remember reading somewhere that pbmining controlled ~10% of the network hashrate and that their pool was represented on blockchain.info/pools, however I may be mistaken about this.

You are mistaken. Many have tried, but nobody could attribute a mining address to PBmining.

It is possible that they are mining on various pools and that if they could be linked to specific pools then they would be at risk of having their pool accounts hacked. I would somewhat doubt this would be the case as the hashrate they claim to have should be enough to solo mine. Also using a mixer would effectively be a fee their customers would be paying as pbmiing would need to pay a fee to the mixing service. 

I think it would make cloud companies even more trustworthy if they allowed users to direct their purchased mining contracts to a pool of their choice (similar to how leaserig operates). This would allow users to be able to truly verify that they have purchased mining capacity as they can more or less independently verify as such.

I agree that would be the best. That would eliminate the need for proof via their mining address because you would be able prove it using your own address.

I really do not understand why cloud mining services do not do this. I would think that this would actually reduce costs as it likely cost them a non-zero amount to run their own pool and keep track of each users' balance. This is especially true for pbmining as their customers must prepay 5 years wroth of electricity

[sumantso]

I have no doubt that quite a few of these are ponzis. Once these blows up it will be a good exercise to see what percentage was legitimate.

[Sythyn]

I have no doubt that quite a few of these are ponzis. Once these blows up it will be a good exercise to see what percentage was legitimate.

I am not sure about "quite a few" (this implies it is man/most of them) but I would say that a non-zero number of them are ponzis. I would especially consider LTCgear to most likely be a ponzi.

I think that once the first cloud mining site proves to be a ponzi, it will be much more difficult for other sites to continue to sell their mining capacity (and it may be a good time to invest in cloud mining if you are certain the company you are buying from is not a ponzi)

[jimmothy]

I have no doubt that quite a few of these are ponzis. Once these blows up it will be a good exercise to see what percentage was legitimate.

I am not sure about "quite a few" (this implies it is man/most of them) but I would say that a non-zero number of them are ponzis. I would especially consider LTCgear to most likely be a ponzi.

The lead bitcoin developer seems to think many are ponzis. https://www.cryptocoinsnews.com/gavin-andresen-suspects-ponzi-schemes-bitcoin-cloud-mining/

I think that once the first cloud mining site proves to be a ponzi, it will be much more difficult for other sites to continue to sell their mining capacity (and it may be a good time to invest in cloud mining if you are certain the company you are buying from is not a ponzi)

You must be new here. There have already been many cloudmining ponzis that have collapsed. Lunamine was a pretty successful/recent one I can think of.

[sumantso]

I have no doubt that quite a few of these are ponzis. Once these blows up it will be a good exercise to see what percentage was legitimate.

I am not sure about "quite a few" (this implies it is man/most of them) but I would say that a non-zero number of them are ponzis. I would especially consider LTCgear to most likely be a ponzi.

The lead bitcoin developer seems to think many are ponzis. https://www.cryptocoinsnews.com/gavin-andresen-suspects-ponzi-schemes-bitcoin-cloud-mining/

Cloud mining ponzis are actually a smart move. Direct ponzis which claims some 'investment' and high returns don't last for even a month. With cloud mining they don't have to give big returns, and slowly accumulate over a period of a few months.

[jimmothy]

I have no doubt that quite a few of these are ponzis. Once these blows up it will be a good exercise to see what percentage was legitimate.

I am not sure about "quite a few" (this implies it is man/most of them) but I would say that a non-zero number of them are ponzis. I would especially consider LTCgear to most likely be a ponzi.

The lead bitcoin developer seems to think many are ponzis. https://www.cryptocoinsnews.com/gavin-andresen-suspects-ponzi-schemes-bitcoin-cloud-mining/

Coud mining ponzis are actually a smart move. Direct ponzis which claims some 'investment' and high returns don't last for even a month. With cloud mining they don't have to give big returns, and slowly accumulate over a period of a few months.

I agree, it really is the perfect market for a ponzi. I think it might be the only market where a well set up ponzi can last indefinitely.

Not only are the returns piss poor for the risk you take (just talking about mining here, not being a ponzi), but a massive portion of the bitcoin/crypto community are completely uneducated/misinformed when it comes to bitcoin/bitcoin mining and no matter how many eye opening scams make the headlines, plenty more naive/gullible noobs will fill their place.

The bitcoin difficulty derivative on havelock makes it clear how profitable a cloudmining ponzi can be. It operates similar to a ponzi but instead of pretending to mine, they make it very clear that it's all an equation and as soon as the reserve fund runs dry, the game is over. Because you know exactly how much btc is left in the reserve, you can price the shares accordingly and nobody gets ripped off.

But the important thing to take from it is how long the derivative has lasted. With no mining and payouts only from the original payments, it's been 7 months already and there's still ~200 days worth of mining payments before the reserve fund runs dry(at the current difficulty). That doesn't even consider the fact that B.sell has had ~0.028 btc/gh in dividends. (B.sell would basically be the ponzi operators cut if they want to keep the reserve at 200 days.)

0.028 btc/gh leftover after paying out mining earnings for 9 months means that if they don't spend any money on advertising/drugs/cars then the ponzi could easily last 6+ more years if difficulty remained at the current level. (which we all know won't happen)

[spin]

I really can't see why people don't see the obvious:

Some may not be a ponzi but still not actually mining.  Given the prices and likely difficulty growth rates they are simply paying you back your own money using a difficulty formula but not actually mining.  The reason they do this is because so many people are willing to pay for cloudmining at crazy high prices.  You should be able to run such an operation reasonably well with limited risk.  One could take in someone's money, and keep it in reserve paying them back until the contract ends.  If you price conservatively you may not ever need money and you should have some money left over once the contract ends.

In essence it's a futures *contract* and basically a bet on future difficulty.  The big risks (to the operataror) is pricing accurately and dynamically and of course the risk that difficulty drops unexpectedly.  With an unexpected difficulty drop, you may have an issue as you will suddenly have to pay out more but will have no additional income.  Of course you can probably hedge your position slightly by buying some real mining capacity just in case.  The extent to which you hedge will determine potential downside (and upside of course).

The big risks to the investor is that the operator is not competetent enough to do the above, or is greedy and starts eating into reserves early (i.e. becomes a ponzi).  The biggest risk to the investor though is their own poorly conceived research in paying overpriced rates for mining. 

For cloudminers I would require either proof of mining, so I know they actual run the right amount of miners.  Alternatively I want assurance that they have enough money on hand to pay out all future contractual committments at a reasonable future difficutly growth assumption.

Of course one could easily be tempted to turn such an operation into a ponzi by paying out from incoming funds and taking the rest as profit, but these guys should already be making money so no need to be crazy.

It's so fricken obvious.  I mean if you read some of the sites they sell you a mining *contract*.  They don't actually say they will be mining.  They payout is not based on actual mining but a formula.  Another clear hint. 

In an overpriced mining market this may well be the only way to effectively sell mining short.  I would do this as well, but feel slightly guilty in doing this.  I can see that you can stay on a slightly grey line by selling contracts and not correcting people when they assume you are actually mining.  I think it's ok to do it, but I would not feel 100% comfortable doing this.  But really the investor is just buying something that's essentially over priced. 

You might think you are safe buying the actual hardware, but I believe the margins of the companies are just adjusted to just reflect the likely profitability, because let's face it, if a company is selling a miner that's going to be extremenly profitable at their marginal electricity cost they'd be sellling a gold, sorry I mean, bitcoin mine. 

[spin]

I wanted to add that with the recent slow down in diffculty might help to expose people who are underfunded.

[spin]

as of my knowledge so many tried  to attribute a mining address to PBmining.but not sure it they succeed....

I don't believe they are mining.  They are simply paying back the money they got.  Given their pricing this should in reasonable scenarios result in them always being left with some profit at the end of the contract.  Of course if difficulty starts dropping more than they allowed for in their pricing they may be in trouble. 

If they are honest, they are keeping the money until the contract is closed and then taking profit.  They might be a ponzi if they are paying releasing profits before the end of their mining contracts, or if they become dependent on new money to pay out older contracts.

These things exist because people are willing to overpay for mining.  If people stop and do the calcs these type of things won't exist. 

[Seketsuna]

The legitimate ones are letting you pay up crazy maintenance fee while the ponzies offer good deals which is so sad....

[Phildo]

Gawminers, LTCgear and PBmining are the noticeable absentees. I am almost sure that LTCgear is a short term ponzi, don't see it giving such a huge returns for a long time.

Both GAW and PBmining are spending a large amount of money in advertising and have been in business for a long time (while active on this forum). I would argue that if either of these companies were a ponzi they would have collapsed by now. LTCgear has has an online presence for <1 year however not on this forum (I think), plus people who are vouching for them always have an affiliate link which is also suspicious.

You should also be able to trace any payouts received through a short number of "hops" through the blockchain to find a coinbase TX of a found block

It will take a lot longer for a cloud hashing scam to fall apart than a regular ponzi scam. If you give me 1 btc for enough "hashrate" to earn .9 btc I can pay you back without buying a miner or getting off my couch.

[jawitech]

Gawminers, LTCgear and PBmining are the noticeable absentees. I am almost sure that LTCgear is a short term ponzi, don't see it giving such a huge returns for a long time.

Both GAW and PBmining are spending a large amount of money in advertising and have been in business for a long time (while active on this forum). I would argue that if either of these companies were a ponzi they would have collapsed by now. LTCgear has has an online presence for <1 year however not on this forum (I think), plus people who are vouching for them always have an affiliate link which is also suspicious.

You should also be able to trace any payouts received through a short number of "hops" through the blockchain to find a coinbase TX of a found block

It will take a lot longer for a cloud hashing scam to fall apart than a regular ponzi scam. If you give me 1 btc for enough "hashrate" to earn .9 btc I can pay you back without buying a miner or getting off my couch.

+1

[jimmothy]

Here's a nice overview of cloudmining companies:

https://bitcointalk.org/index.php?topic=860400.0

[sumantso]

Gawminers, LTCgear and PBmining are the noticeable absentees. I am almost sure that LTCgear is a short term ponzi, don't see it giving such a huge returns for a long time.

Both GAW and PBmining are spending a large amount of money in advertising and have been in business for a long time (while active on this forum). I would argue that if either of these companies were a ponzi they would have collapsed by now. LTCgear has has an online presence for <1 year however not on this forum (I think), plus people who are vouching for them always have an affiliate link which is also suspicious.

You should also be able to trace any payouts received through a short number of "hops" through the blockchain to find a coinbase TX of a found block

It will take a lot longer for a cloud hashing scam to fall apart than a regular ponzi scam. If you give me 1 btc for enough "hashrate" to earn .9 btc I can pay you back without buying a miner or getting off my couch.

Yes, thats why these are the best ponzies to run. Considering that difficulty keeps going up, the investors may never get RoI, so the ponzi schemers don't even have to run.

[philipma1957]

Gawminers, LTCgear and PBmining are the noticeable absentees. I am almost sure that LTCgear is a short term ponzi, don't see it giving such a huge returns for a long time.

Both GAW and PBmining are spending a large amount of money in advertising and have been in business for a long time (while active on this forum). I would argue that if either of these companies were a ponzi they would have collapsed by now. LTCgear has has an online presence for <1 year however not on this forum (I think), plus people who are vouching for them always have an affiliate link which is also suspicious.

You should also be able to trace any payouts received through a short number of "hops" through the blockchain to find a coinbase TX of a found block

It will take a lot longer for a cloud hashing scam to fall apart than a regular ponzi scam. If you give me 1 btc for enough "hashrate" to earn .9 btc I can pay you back without buying a miner or getting off my couch.

Yes, thats why these are the best ponzies to run. Considering that difficulty keeps going up, the investors may never get RoI, so the ponzi schemers don't even have to run.

they will run into trouble with a btc price drop from say 350 usd to 199 usd.   these stable 325-375 numbers  help them if they are fake.  GAW/ZEN has a lot of money invested into them.  It would be interesting to see if the new move of 'PAYCOIN' works out for them.

I made a few bucks with them but I have very little invested with them.  Ever since I stumbled onto the nicehash-westhash = trouble for their genesis/s-3 setup I slowly sold off almost all I have with them.