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Author Topic: Cloudmining 101  (Read 27431 times)
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November 17, 2014, 09:42:17 AM
 #1

Discussion moved here:
https://bitcointalk.org/index.php?topic=878387.msg9697654

Cloudmining 101

Everyone here is focused on ROI, hardly anyone seems to care if these companies are legit. The majority of cloudmining websites dont do any mining whatsoever. They pay out old customers via coinmixers from revenue that comes from recruiting new ones. This is the common definition of a ponzi scheme. No surprise, to keep the game going they usually heavily emphasize referrals and signature campaigns to make you do their dirty PR work.

Now why would you care if these companies are mining or not? All that matters is they pay out, right?
Wrong.


If the company (or more aptly: scammer) isnt mining, then its impossible on average for the investors to profit. Early investors might, but only at the expense of later ones.  If no mining is going on, then there is nothing to generate those profits. So dont be fooled by low prices or high payouts. Ponzi miners will drop prices as low they need to keep the game going until one day they vanish.

And dont think because its been running for 10 months, that it has to be legit either. Unlike traditional ponzi's, mining ponzi's dont risk a bank run. You cant get your money out if you begin worrying, so they can run a fairly long time.

Take PBmining,  they have been around since the beginning of 2014 and havent failed to pay so far. Does that prove its not a ponzi? Hardly. Based on their own stats, in the past month they sold ~1.5  PH worth of contracts. Good for around ~2200 BTC. During that same month they paid around 1600 BTC in dividends. A net profit of  ~600 BTC or nearly a 1/4 of a million dollar. Just for running a website. So the fact they are still paying out doesnt prove they are legit, its actually far more likely they are still paying out because it maximizes their profits:  they are still getting far more revenue from new victims than they are paying out.

Of course that cant last. At some point the new sales will slow while the owed dividends keep going up. Once the latter becomes bigger than the former, guess what the anonymous operator will do? The same thing lunamine, coinsoncloud, pirate, bitcoin-trader and countless other (mining) ponzi's before did.



Be smart. Think before you invest. Dont trust *anyone* with a referral link in his signature.

Criteria to help you spot a cloud mining scam/ponzi.

1) No public mining address / no user selectable pool.
A cloud mining company that wont let you direct the hashrate to your pool of choosing and cant prove its actually mining bitcoins itself, is very likely a scam. There is no reason to hide mining address or not sign blocks. None.

2) No endorsement from any asic vendor
Asic vendors will gladly make a simple post to show the company in question is a significant customer of theirs. Its free advertisement for them and it helps their customer grow their business, so there is absolutely no reason they wouldnt. If a (cloud) mining company cant get any asic vendor to post such endorsement, you should assume they dont have any hardware to mine with.

3) No relevant pictures of their hardware and datacenter
There is no reason not to provide such pictures, except of course, if there is nothing to take pictures off. Mind you: pictures can be faked. Picture dont prove current ownership. So like all criteria listed here, by themselves they are by far insufficient proof.

4) Open ended IPO
Unless the cloud mining is operated by the asic vendor himself, you can not sell an unlimited amount of hashrate. Hardware takes (usually a long) time to order, arrive and deploy. Any company that doesnt limit sales or make public how much hashrate they sold vs what they have (provably) deployed should be considered extremely suspicious.

5) Referral programs and social networking
Referral programs, especially ones that pay almost 10%, are a huge red flag. The mining market is cut throat with razor thin margins. No real company can afford to pay 10% referrals on below market cloudmining prices. Referral programs almost always serve only to feed the ponzi and provide financial incentive to posters to lie about the true nature of the company. Never trust anyone with a referral link in their sig.

6) Anonymous operators
If the operators are hiding behind whoisguard, provide no provable identity and especially when, like in some cloudmining cases, they use demonstrably false ID or company registration information, you have to be nuts to trust them with your money.

7) No exit strategy
If you cant sell your position, you cant get your money out. Thats the ideal case for a ponzi and allows it to run for a  long time.

Application of these criteria to some cloudmining companies

Feel free to post corrections or additions.

Code:
Lunaminer.com         1+2+3+4+5+6+7      => 7/7 = Ponzi already collapsed
CoIntellect.com       1+2+3+4+5+6+7++    => 7/7 = Ponzi ( + requiring likely malware/wallet stealing software)
coinsoncloud.eu       1+2+3+4+5+6+7      => 7/7 = Ponzi already collapsed (https://bitcointalk.org/index.php?topic=853837.0) apparently
Cryptomine.io         1+2+3+4+5+6+7      => 7/7 = Ponzi
cloudmining.website   1+2+3+4+5+6+7      => 7/7 = Ponzi
PBmining.com          1+2+3+4+5+6+7      => 7/7 = Ponzi
cloudminr.io          1+2+3+4+5+6+7      => 7/7 = Ponzi
grmining.com          1+2+3+4+5+6+7      => 7/7 = Ponzi
terrabox.me           1+2+3*+4+5+6+7*    => 6/7 = Ponzi ( pictures are not convincing to me for now, exit strategy involves  60+ days stall tactic)
bitcoincloudservices  1+2+4+5+6*+7       => 6/7 = Ponzi ( + founded by known scammer  https://bitcointalk.org/index.php?topic=860400.msg9638868#msg9638868)
hashie.co ("gen1")    1+2+3+4+5+6        => 6/7 = Ponzi
ltcgear               1+3+4+5+6          => 5/7 = (very) suspicious (info welcome)
Zeushash              1+2+3+4+5          => 5/7 = (very) suspicious (info welcome)
GAWminer              1+4+5+~7           => 4/7*= Possibly/partially legit based on criteria set forth. Based on wider context: more suspicious than a nun squatting in a cucumber field
genesis-mining        1+4+7              => 3/7 = Probably legit
Megamine.com          1+4                => 2/7 = Probably legit
Cex.io                4                  => 1/7 = Legit
KNCloud               7                  => 1/7 = Legit
Hashnest(*after merge)                   => 0/7 = Legit
AMhash                                   => 0/7 = Legit
Cryptx PETAmine                          => 0/7 = Legit

Not rated yet:

Cloudhashing.com    2?+4?+7?   (looking in to it, feedback welcome)
hashprofit.com          1+3+4+~6+7     (looking in to it, feedback welcome)


Disclaimer

being legit does not equal being a good investment. By and large, cloud mining has not been profitable historically, and I dont expect it  will.  I do not recommend you invest in (cloud) mining at all, but if you do, at least invest in a company that will actually contribute to securing the blockchain and is not extremely likely to just steal your money.

Also, being rated as legit here doesnt guarantee you anything. All it shows is that said company has provided reasonable evidence it is a real company and your investment is backed by actual hashrate. It doesnt guarantee they wont scam you, and it certainly doesnt imply anything about profitability.

Discussion moved here:
https://bitcointalk.org/index.php?topic=878387.msg9697654
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November 17, 2014, 09:54:28 AM
 #2

NFAQ (not frequently enough asked questions)

Q: How can you know for sure xyz is a ponzi? Can you prove it?
No one can prove unicorns dont exist. Perhaps they do.  But until evidence surfaces of their existence, sensible people will assume they do not exist based solely on the complete absence of evidence to the contrary. Likewise, when faced with a cloudmining company, you should ask what evidence said company has provided  to prove they are not a Ponzi, or why they have failed to take  a few simple steps to prove it. When no credible evidence is presented, you should assume its a scam. Unless you want to believe in unicorns.
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November 17, 2014, 09:55:49 AM
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Interesting view. Agree with much of it...

Just a detail: in what you say about general mining profitability, shouldn't we distinguish between Bitcoin mining and Altcoin mining?

Also, not sure that GawMiners deserve the 7: it's possible to sell hashlets at any time using a dedicated market, which seems to be a good "exit strategy" for some (not sure it's enough to achieve ROI, but it surely helps).


Crypto.direct - Short daily Bitcoin/Altcoins news
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November 17, 2014, 10:00:34 AM
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Interesting view. Agree with much of it...

Just a detail: in what you say about general mining profitability, shouldn't we distinguish between Bitcoin mining and Altcoin mining?

Also, not sure that GawMiners deserve the 7: it's possible to sell hashlets at any time using a dedicated market, which seems to be a good "exit strategy" for some (not sure it's enough to achieve ROI, but it surely helps).



I wasnt aware its possible to transfer hashlets. Is there a trading platform for them? Anyway, I removed the 7 assuming there is one. I do remain very skeptical about them, though I admit I havent looked in to them all that closely. Feedback is welcome.

As for altcoins; the same fundamental principles apply.
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November 17, 2014, 11:51:00 AM
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For LTCgear the operator is well know.  (Chris and also post on Litecointalk.org as beekeeper.)   While sometimes slow to response he does respond to email.  So I don't think #6 applies.

Also neither should there be #7.   You can transfer shares and many online stores have been set up to sell shares.   Even more users are selling their own shares.   So there is a clear exit strategy.  

For #5 - The referral program is new about 2 months old and I think most users would like Chris to shut it down.   It does pay 11% and that leads to a lot of people hyping LTCgear which is causing support issues.   Hopefully it get shut down.  

#4 is also debatable.   The shares sold today are very different than those sold a year ago and LTCgear often is run out of stock.   There is a raging debate about it on Litecointalk.      

#3 - there isn't any current pictures

I would count LTCgear as:   1+3+4(?)+5(?)   whatever that means.
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November 17, 2014, 12:04:30 PM
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For LTCgear the operator is well know.  (Chris and also post on Litecointalk.org as beekeeper.)   While sometimes slow to response he does respond to email.  So I don't think #6 applies.

Do you know for sure who to sue if he runs off with the money? If not, #6 applies. I also dont get why he would use whoisguard if he is "well known":
http://whois.domaintools.com/ltcgear.com

Quote
Also neither should there be #7.   You can transfer shares and many online stores have been set up to sell shares.   Even more users are selling their own shares.   So there is a clear exit strategy.  

Do you have a link?
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November 17, 2014, 12:17:56 PM
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4) Open ended IPO
Unless the cloud mining is operated by the asic vendor himself, you can not sell an unlimited amount of hashrate. Hardware takes (usually a long time) to order, arrive and deploy. Any company that doesnt limit sales or make public how much hashrate they sold vs what they have deployed should be considered extremely suspicious.

5) Referral programs and social networking
Referral programs, especially ones that pay almost 10%, are a huge red flag. The mining market is cut throat with razor thin margins. No real company can afford to pay 10% referrals on below market cloudmining prices. Referral programs almost always serve only to feed the ponzi and provide financial incentive to posters to lie about the true nature of the company. Never trust anyone with a referral link in their sig.

4) It makes more sense for us to sell hashpower (even if it exceeds our capacity), and acquire the hardware later. This is in our terms and conditions by the way. In fact, a Ponzi would be inclined to limit hardware in order to prevent the Ponzi from collapsing too fast.

5) Our affiliate rates are 3% and we're considering lowering it. Referral programs that offer 10% are obviously scams, but our rate is nowhere near that.

-Sahra

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November 17, 2014, 12:21:55 PM
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4) It makes more sense for us to sell hashpower (even if it exceeds our capacity), and acquire the hardware later. This is in our terms and conditions by the way. In fact, a Ponzi would be inclined to limit hardware in order to prevent the Ponzi from collapsing too fast.

The collapse of this kind of ponzi is automatically slow since payouts are only a small fraction of the initial investment and get slowed down further by increasing difficulty. There is no reason to artificially limit sales.

And thanks for acknowledging you are selling hash rate that you do not own.

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November 17, 2014, 12:24:23 PM
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The collapse of this kind of ponzi is automatically slow since payouts are only a small fraction of the initial investment and get slowed down further by increasing difficulty. There is no reason to artificially limit sales.

Not if you're offering hashpower at ROI periods that is comparable to pirateat40's 7% weekly.. in which case you must limit sales in order to prevent your ponzi from collapsing.

Have you researched LTCGear's pricing at that time, as well as their supposed pictures which are FPGAs that could cover maybe 5 MH total?

-Sahra

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November 17, 2014, 12:30:26 PM
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CoIntellect.com is another website I would check out.
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November 17, 2014, 12:42:51 PM
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CoIntellect.com is another website I would check out.

Added. Seems to be far worse than "just"  a ponzi.
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November 17, 2014, 12:48:00 PM
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Hashie is 100% a ponzi and the only people who can't see that are the blind ones. If you follow the blockchain and there address you will see they use customer deposited funds for payouts and also hide behind a protected whois

https://www.namecheap.com/domains/whois/results.aspx?domain=hashie.co
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November 17, 2014, 12:53:27 PM
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Hashie is 100% a ponzi and the only people who can't see that are the blind ones. If you follow the blockchain and there address you will see they use customer deposited funds for payouts and also hide behind a protected whois

https://www.namecheap.com/domains/whois/results.aspx?domain=hashie.co

Try again with an account more than a week ago.

Which competitor are you from? Smiley

-Sahra

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November 17, 2014, 12:59:21 PM
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well compiled, and most likely totally 100% correct.

tips    1APp826DqjJBdsAeqpEstx6Q8hD4urac8a
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November 17, 2014, 01:00:35 PM
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can i ask you how can you make a full investigation on a website? not only cloudmining but also some PTC sites. I dont know how to track their address X_X

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November 17, 2014, 01:00:47 PM
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Thank you for sharing the information it was very helpful. Hats off to ya mate. Is it possible for me to ask you to look into a website and see if they are legit or not?
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November 17, 2014, 01:04:03 PM
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Thank you for sharing the information it was very helpful. Hats off to ya mate. Is it possible for me to ask you to look into a website and see if they are legit or not?

Which website ? I think all are covered in the list above...
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November 17, 2014, 01:07:44 PM
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can i ask you how can you make a full investigation on a website? not only cloudmining but also some PTC sites. I dont know how to track their address X_X

Nope, but you can apply much of the above logic to any website that is asking you money. If there is any doubt, assume its a scam. In bitcoin land thats a fairly safe bet.
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November 17, 2014, 01:12:16 PM
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Try again with an account more than a week ago.

Says the ponzi operator that registered a month ago  Roll Eyes
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November 17, 2014, 01:13:16 PM
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can i ask you how can you make a full investigation on a website? not only cloudmining but also some PTC sites. I dont know how to track their address X_X

Nope, but you can apply much of the above logic to any website that is asking you money. If there is any doubt, assume its a scam. In bitcoin land thats a fairly safe bet.
I'd recommend you to include HaveLock in your list. They are taking people's money and investing it in multiple cloud mining services and thereby taking there share. If any cloud service fails, they wont be responsible, but they'll take the cut from people's profit. HaveLock is the master of SCAM.

I AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMERI AM A SCAMMER
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