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Author Topic: ▁ ▂ ▄ ▅ ▆ Cloudmining 101 (ponzi risk assessment) ▆ ▅ ▄ ▂ ▁  (Read 361527 times)
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Puppet (OP)
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November 30, 2014, 12:39:32 PM
Last edit: March 09, 2015, 07:32:07 AM by Puppet
Merited by ABCbits (29), suchmoon (5), James_CRYPTOSTAR.MONEY (1)
 #1

(this is a self-moderated thread to avoid being spammed. Every post that contains a referral link to any cloudmining site will be deleted, for reasons explained below).

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 and only if the ponzi can survive long enough.  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 ( update: pbmning meanwhile collapsed: https://bitcointalk.org/index.php?topic=887871  qed.).

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 / fractional reverse mining risk
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  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.

8 ) Bonus point for "guaranteed profit"
So far, Ive only seen bitcoinmaker.ch do this. If anyone guarantees you a bitcoin denominated profit, and especially a 30+% one, you can be sure its a ponzi, all the other criteria become unimportant. There is no such thing as certain profit when it comes to mining, no one knows how the network will evolve, or what btc exchange rate will do. If anyone could somehow be certain of making a 30% profit, they wouldnt need your money (and they wouldnt give the profit to you).

Application of these criteria to some cloudmining companies

Feel free to post corrections or additions.

Ponzi's that have already collapsed as predicted:

Code:
PBmining.com          1+2+3+4+5+6+7      => 7/7 = Ponzi
Lunaminer.com         1+2+3+4+5+6+7      => 7/7 = Ponzi
coinsoncloud.eu       1+2+3+4+5+6+7      => 7/7 = Ponzi
Cryptomine.io         1+2+3+4+5+6+7      => 7/7 = Ponzi
hashie.co ("gen1")    1+2+3+4+5+6        => 6/7 = Ponzi
bitcoinlabmining.com  1+2+3+4+5+6+7      => 7/7 = Ponzi
ltcgear               1+3+4+5+6          => 5/7 = (very) suspicious
hashprofit.com        1+2+3+4+5          => 5/7 = (very) suspicious
minethatcloud.com     1+2+3+4+5+6+7      => 7/7 = Ponzi
CoIntellect.com       1+2+5+6+7          => 5/7 = (very) suspicious
terabox.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)
chabatmining.com      1+2+3+5+6+7        => 6/7 = Ponzi
Ecrypto.co.in         1+2+3+4+6+7        => 6/7 = Ponzi (+ confirmed scam, they are no partners of cex.io)
GenerateBTC.com       1+2+3+4+5+6+7      => 7/7 = Ponz

Likely Ponzi scams that have yet to collapse:
Code:
cloudminr.io          1+2+3+4+5+6+7      => 7/7 = Ponzi
cloudmining.website   1+2+3+4+5+6+7      => 7/7 = Ponzi
Skycoinlab.com        1+2+3+4+5+6+7      => 7/7 = Ponzi (+ organized by serial ponzi scammer: ?topic=583177.msg10298730)
btcslice.com          1+2+3+4+5+6+7      => 7/7 = Ponzi (+ pays out in reversible paypal ?)
grmining.com          1+2+3+4+5+6+7      => 7/7 = Ponzi
bitcoinmaker.ch       1+2+3+4+6+7+8      => 7/7 = Ponzi
eobot.com             1+2+3+5+6+7        => 6/7 = Ponzi (+ possible malware/wallet stealing software)
hashwar.co            1+2+3+4+6+7        => 6/7 = Ponzi
bitrush.com           1+2+3+4+6+7        => 6/7 = Ponzi
Code:
nexusmining.com       1+2*+3+4+5+7       => 6/7 = Ponzi (Guy from Spondoolies says im wrong, but I cant score what I havent seen and he seems to confirm they have no hardware)
minerslab.com         1+2+3+4+6+7        => 6/7 = Ponzi (+ selling hardware that doesnt exist + using purchased "legendary" account)
bitcoincloudservices  1+2+4+5+6*+7       => 6/7 = Ponzi (+ founded by known scammer  https://bitcointalk.org/index.php?topic=860400.msg9638868#msg9638868)
scrypt.cc             1+2+3+4+5+6        => 6/7 = Ponzi (preliminary assessment)
Kryptologika          1+2+3+4+*          => */7 = Ponzi -> passthrough of AMhash which is defunct. Currently operating as fractional reserve/ponzi.
hashcoins.com         ~1+2+3+4+7         => 5/7 = (very) suspicious (user selectable pool requires fee, dc pictures show no miners, linkedin profile doctored, hardware sales very dubious,..)
Zeushash              1+2+3+4+5          => 5/7 = (very) suspicious

Rest:
Code:
Cryptsy MN            1+2+3+4            => 4/7 = Possibly/partially legit ( + no details on fee structure)
cloudmining.sg        1+2+4+7            => 4/7 = Possibly/partially legit
genesis-mining        1+4+7              => 3/7 = Probably legit (risk of fractional reserve mining)
Megamine.com          1+4                => 2/7 = Probably legit
Bit-x.com             1+4                => 2/7 = Probably legit (preliminary assessment, partnership confirmed by Bitfury)
pow88.com             1+2                => 2/7 = Probably legit (preliminary assessment)
KNCcloud              7                  => 1/7 = Legit (but as hardware vendor, they broke their promise not to selfmine with more than 5% of customers hashrate )
Hashnest (umisoo)                        => 0/7 = Legit

Obsolete or suspended:
Code:
AMhash                                   => 0/7 = Legit (if you buy directly) / divs momentarily (?) suspended
Cex.io                4                  => 1/7 = Legit
Cryptx PETAmine                          => 0/7 = Legit
GAWminers             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


Proving a ponzi

A ponzi is defined by the absence of a mechanism to generate revenue or profits (in this case: mining hardware). Proving something is a ponzi would therefore require proving a negative. You can not prove a negative, so in theory its possible any of the companies I labeled as "ponzi" are in fact mining. But thats like saying in theory its possible unicorns do exist or that its possible that Nigerian Prince who emailed you yesterday, really inherited a $500M gold mine concession and wants to share it with you. You can not prove thats not true either, but to most sensible people the complete absence of evidence is a very compelling reason to dismiss the claim, and thus certainly reason enough not to invest there.

Success rate so far

Recently imploded cloudmining scams that where  rated as (very) suspicous or ponzi: 14/14 (100% hit rate)
Companies that were rated as probably/legitimate yet substantially failed to honor their contracts: 1*/7 (86 % hit rate)
(*) Amhash which may yet resume payments, though I wouldnt bet on it

Overall hit rate: 95%

Want to help out ?

You can help out by reporting new ponzi's and preparing the assessment.

You can tip me on this address: 15YNTMoAzTCve64rveEka75qCeJMZpmDCx
Anything I receive there will be used to further this cause, like doing signature campaigns to raise awareness.

Here is the current signature campaign thread: https://bitcointalk.org/index.php?topic=888864
Feel free to join, you'd be helping a good cause and you might win 0.1BTC

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.
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November 30, 2014, 01:50:59 PM
 #2

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

Looks like the most suspicious among all to me. But I got the most of BTC from them through promo sales (50% discounts!) and refferals. They gave me three times more Khs for free than I bought from them on sale. Two weeks ago, I removed all referrals links from my signature on all forums which I use, but I still continue to receive free Khs from hashprofit referrals.

.
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November 30, 2014, 02:56:48 PM
 #3

@Puppet,
So apparently we can check and verify our hashing power on hashie.co for AMhash on its website...
http://amhash.com/hashie/index.php

More reliable in terms of AMhash? o.O
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November 30, 2014, 03:15:09 PM
 #4

I edited the OP to make clear that hashie's entry is about what they call "gen 1". Thats hashrate they have been selling since inception, and still sell,for which there is no shred of evidence, and no endorsement from anyone. In fact, its quite remarkable how hashie tout the provability of AM1 and remain utterly silent on the question of provability of their own hashrate. Unless you accept their logic that because they charge maintenance fees, it has to be legit (Im not kidding).

AMhash have stated they will back the contracts sold through hashie, so your main concern there is AMhash's credibility. Although you should wonder what happens when you place an order through Hashie and they dont pass it on. I sure would ask that question to Amhash before placing an order.


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December 01, 2014, 07:24:36 AM
 #5

hashie is endorsed by ASICMINER, they sell AMHASH shares at hashie and it's linked from their website
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December 01, 2014, 07:26:38 AM
 #6

hashie is endorsed by ASICMINER, they sell AMHASH shares at hashie and it's linked from their website

Please reread the post above yours carefully. Then if you can find any endorsement of any kind for their "Generation 1", please do link.
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December 01, 2014, 08:38:53 AM
 #7

All of them are scams. What's so hard about hodling Bitcoin? Any time you give someone your Bitcoin, you just begin begging for it back.

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December 01, 2014, 08:45:02 AM
 #8

All of them are scams. What's so hard about hodling Bitcoin? Any time you give someone your Bitcoin, you just begin begging for it back.

They may all be bad investments, that doesnt mean they are all the same. Unlike you I do see a big difference between an anonymous scammer who's sole intent is to steal your coins the moment his ponzi implodes and a real, identifiable company thats selling provable hashrate that may or may not yield a profit, depending solely on future difficulty. Read the disclaimer too.
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December 01, 2014, 09:22:31 AM
 #9

All of them are scams. What's so hard about hodling Bitcoin? Any time you give someone your Bitcoin, you just begin begging for it back.

They may all be bad investments, that doesnt mean they are all the same. Unlike you I do see a big difference between an anonymous scammer who's sole intent is to steal your coins the moment his ponzi implodes and a real, identifiable company thats selling provable hashrate that may or may not yield a profit, depending solely on future difficulty. Read the disclaimer too.

I do believe they are all exits for the creator. For example, petamine has cash in hand from the ipo on havelock. They have no incentive to maintain mining and that's where customers become the sheep. The mining has 0 profit. The remaining pumpers trade the actual "stock". The actual mining has no value. They even spread lies it would switch to p2pool to increase the stock price.

I don't think you are trying to mislead anyone but you haven't understood how deep these scams go. Or where the incentives and exits are. Cex.io mining shares were way above market value, what they could mine, because the shares were being pumped and dumped. The actually mining wasn't even taken into account.

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December 01, 2014, 09:39:53 AM
 #10

I do believe they are all exits for the creator.

As is any for-profit company. But we dont call them scams unless they fail to comply with their contractual obligations. The purpose of this list is to help determine how (un)likely it is an operator will honor the contracts its selling, not to determine how (un)profitable those contracts may be, either for the seller or buyer.

Quote
For example, petamine has cash in hand from the ipo on havelock. They have no incentive to maintain mining and that's where customers become the sheep. The mining has 0 profit. The remaining pumpers trade the actual "stock". The actual mining has no value. They even spread lies it would switch to p2pool to increase the stock price.

I don't think you are trying to mislead anyone but you haven't understood how deep these scams go. Or where the incentives and exits are.

No offense, but if you actually followed the petamine thread, you must have noticed I was one of the only people there that actually understood what was going on and quite accurately predicted what was going to happen. So dont tell me that I "dont understand".

Peta was a hugely overpriced IPO, but you can not blame the issuer for market demand. You are also mistaken in your assumption the p2pool switch rumor was to boost price; the operator holds no shares in peta, he has no incentive to boost the price post IPO. Its silly investors who thought that rumor was somehow going to boost the price, in reality switching to P2Pool would have been a really stupid decision, shareholders should be grateful he did not.



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December 02, 2014, 07:52:27 PM
 #11

Hi,

Thanks for putting this up.  I am considering investing in cloud mining and this list is helpful.  I'm surprised about Zeus.  Aren't they a vendor also?  If so do they qualify for a 2?  Are AMHash legit.  They don't look it?  What evidence is there that are legit?

Thanks
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December 02, 2014, 08:05:27 PM
 #12

Thanks for putting this up.  I am considering investing in cloud mining and this list is helpful.  I'm surprised about Zeus.  Aren't they a vendor also?  If so do they qualify for a 2? 

The list is mostly targeting bitcoin (sha), as I dont really follow the altcoin scene. Zeusminer does sell scrypt machines. but I have not seen any compelling evidence for the SHA mining contracts they sell. If there is any, please link it.

Quote
Are AMHash legit.  They don't look it?  What evidence is there that are legit?

AMhash is a cooperation between asicminer (AM) and RockMiner. Both are well known, especially AM, which is one of the first companies to produce bitcoin asics. There is no real doubt AMhash is "real", in the sense that they have the hashrate. Not only do have the endorsements, photo's, most importantly we have public mining addresses for them. The big problem IMO with AMhash is the reseller, which currently only is hashie which is at best shady.
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December 02, 2014, 10:10:36 PM
 #13

As I can see here u have listed GAWminer and Genesis-Mining as Probably Legit. Maybe, according to your criteria, they are. But, I'd request to u to check the following threads to get informed about the actual picture.


i. https://bitcointalk.org/index.php?topic=809563.0
ii. https://bitcointalk.org/index.php?topic=875487.0
iii. http://www.reddit.com/r/BitcoinMining/comments/2enhh4/genesisminingcom_is_a_dishonestly_run_business/

I suggest you read the entire line about GAW.  in case you cant scroll horizontally its rated "4/7*= Possibly/partially legit based on criteria set forth. Based on wider context: more suspicious than a nun squatting in a cucumber field".

As for genesis mining; I only see an accusation of shilling or sock puppetry. That sort of behavior wouldnt surprise me one bit from any company on my list. I make no attempt to judge company ethics, the disclaimer defines legit as " All it shows is that said company has provided reasonable evidence it is a real company and your investment is backed by actual hashrate." If you have evidence that undermines that claim for genesis mining, or my rating for it,  Id love to see it.
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December 02, 2014, 10:52:51 PM
 #14


AMhash is a cooperation between asicminer (AM) and RockMiner. Both are well known, especially AM, which is one of the first companies to produce bitcoin asics. There is no real doubt AMhash is "real", in the sense that they have the hashrate. Not only do have the endorsements, photo's, most importantly we have public mining addresses for them. The big problem IMO with AMhash is the reseller, which currently only is hashie which is at best shady.

The other reseller is havelockinvestments.com

.
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December 02, 2014, 10:56:24 PM
 #15


The other reseller is havelockinvestments.com


havelock is a secondary market, there are no IPO's there right now for amhash, and non planned that I know off. Not that havelock is beyond scrutiny
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December 03, 2014, 02:46:37 AM
 #16

As I can see here u have listed GAWminer and Genesis-Mining as Probably Legit. Maybe, according to your criteria, they are. But, I'd request to u to check the following threads to get informed about the actual picture.


i. https://bitcointalk.org/index.php?topic=809563.0
ii. https://bitcointalk.org/index.php?topic=875487.0
iii. http://www.reddit.com/r/BitcoinMining/comments/2enhh4/genesisminingcom_is_a_dishonestly_run_business/

Next time read the threads before repeating FUD. Don't just link them because you saw the word "scam" in the topic. This is one of the posts from the first link you posted:

you sold 5 mh/s of Zen for $90 but wanted to post them for $900 ?  so you leave GAW CEO negative feedback for it ?  lol  you should thank them.  you came out way ahead.  the zen are selling for $10-12 each now.  

i never thoroughly read your post till now.  i thought you sold a larger lot size.  seems to me like your moaning and groaning over nothing.  put on your big pants.  there are folks that actually did have mistake sales where they sold 900 zens for $18 total.  IMO you should give negative feedback when it is deserved.  seems to me like you jumped the gun.  

my .02


I am not sure why the OP is even still on default trust (especially after two long standing very reputable members were removed from default trust for much less of a questionable feedback). The OP is clearly trying to scam GAW by trying to get them to pay him an over market price of the hashlets he was "selling"


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December 03, 2014, 07:22:58 AM
 #17


chabatmining.com

1+2+3+5+6+7 Ponzi
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December 03, 2014, 07:34:11 AM
 #18

Checked and added
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December 03, 2014, 02:33:46 PM
 #19

i am interested in mining as newbie and this thread is easy to understand.
mining at this point is not wise? or is it better to wait for later moment when price is higher.
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December 03, 2014, 02:38:22 PM
 #20

i am interested in mining as newbie and this thread is easy to understand.
mining at this point is not wise? or is it better to wait for later moment when price is higher.

What's so hard about buying bitcoin? The fact you don't have to beg someone for it back?

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