{"id":28144,"date":"2014-12-30T06:15:03","date_gmt":"2014-12-30T11:15:03","guid":{"rendered":"http:\/\/insidebitcoins.com\/?p=28144"},"modified":"2024-06-20T05:18:36","modified_gmt":"2024-06-20T05:18:36","slug":"bitcoin-cloud-mining-service-craters-how-can-you-tell-the-difference-between-a-profit-maker-and-a-ponzi-scheme","status":"publish","type":"post","link":"https:\/\/insidebitcoins.com\/news\/bitcoin-cloud-mining-service-craters-how-can-you-tell-the-difference-between-a-profit-maker-and-a-ponzi-scheme","title":{"rendered":"Bitcoin Cloud Mining Service Craters: How Can You Tell the Difference Between a Profit Maker and a Ponzi Scheme?"},"content":{"rendered":"

NEW YORK (InsideBitcoins) — Mining bitcoin has become a big ticket manufacturing game, played by operators with deep venture capital pockets. The days of desktop mining are all but gone. Instead, would-be home gamers are lured to “cloud mining<\/a>” operations — a buy-in to collective mining farms, some claiming advanced supercomputing powered by “renewable hydroelectric power” and Polar plants cooled by sky blue Arctic air.<\/p>\n

You buy all the hashing power you want, they do the rest. No need to buy expensive hardware with near-instant obsolescence. And forget the costs of electricity, hosting or maintenance.<\/p>\n

It sounds particularly appealing to those looking to strike it rich in a cryptocurrency gold rush. But the hills are thick with thieves and thin margins.<\/p>\n

One cloud mining pool went offline this weekend — and at least one other is gathering a growing number of disgruntled users.<\/p>\n

No payouts here, just music and Morse code<\/strong><\/p>\n

\"bitcoin<\/a>
Photo: PeerNova<\/figcaption><\/figure>\n

Hashie.co \u2013 whose homepage was abruptly replaced by an alternate reality game comprised of music and Morse code \u2013 went dark after a growing number of complaints regarding missed payouts. The company launched just two months ago.<\/p>\n

CloudHashing.com, another pooled mining operation, has faced questions about\u00a0\u00a0missed payouts, as well. One user told Inside Bitcoins<\/em> that he had been buying CloudHashing contracts since last January \u2013 after attending the Inside Bitcoins Conference in New York.<\/p>\n

“The mining produced results every day in the first six months but began to get spotty in November when there were eight days of no new BTC being mined,” he told us. “Same thing in December. I have seen nothing in my account for eight days. Also, they stopped the revenue reinvestment plan in early December. There has been no communication to explain this.”<\/p>\n

[Read More: What Is Bitcoin Mining?<\/a>]<\/strong><\/span><\/p>\n

Our inquiry to PeerNova, the parent company of CloudHashing, raised a quick response from Emmanuel Abiodun, president and CCO of PeerNova.<\/p>\n

“Because of the size of the bitcoin network, we have seen some significant time variances in block discovery by our service,” Abiodun told Inside Bitcoins<\/em>. That variability in results has impacted regular payouts and returns, the company says. “To mitigate this, we will be moving our machines to alternate larger pools until our own pool size increases,” Abiodun added.<\/p>\n

Such fragility in generating revenue has to be a concern for not only cloud mining consumers, but the pools themselves. Less than two weeks ago, PeerNova announced Series A equity and debt funding totaling nearly $9 million, led by Mosiak Partners. The company said the funding would be used to “accelerate its blockchain-based enterprise products.”<\/p>\n

That could be interpreted as a pending pivot in their business plan, perhaps with a diminished focus on consumer cloud mining contracts as the company marshals its resources for\u00a0the development of “multiple” commercial-based applications in the New Year.<\/p>\n

Looking for ‘a cheat-proof’ scheme<\/strong><\/p>\n

But while CloudHashing customers may be mollified for the moment — and Hashie clients apparently left out in the cold — how can a consumer tell the difference between a pooled platform offering a true profit from one that is nothing more than a Ponzi scheme?<\/p>\n

\n

Cloud hashing is the easiest scam to run in bitcoin. Beware of promises of returns and large farms. Photos depict Potemkin Mining Farm<\/p>\n

— Andreas (aantonop Team) (@aantonop) December 29, 2014<\/a><\/p><\/blockquote>\n