Cloud Mining – Profitable or an Evolution of a Scam?

Last updated on October 13th, 2017 at 11:26 am

If you’re subscribed to 99Bitcoins then you probably know that once in a while I ask my readers if there’s anything they’d like me to cover. The 1st most popular request  is “how do I get free Bitcions” :) The 2nd most popular request is to cover cloud mining.

Cloud mining seems to good to be true

Since mining at home is so incredibly difficult many people are looking for cheaper solutions that don’t involve buying expensive hardware that will quickly become outdated. Cloud mining seems like the perfect solution – you “rent” some computing power that is (supposedly) located in a remote location and just enjoy the profits without all of the hassle.

Today if you google the term “cloud mining” you’ll find endless possibilities to jump on board. Most of these website will show you tons of confusing numbers (especially if you’re a newbie) and promise that cloud mining is “the easiest and most efficient way to earn Bitcoins”.

One of my earlier posts dealt with mining vs buying Bitcoins, and it basically showed why mining isn’t a cost effective way to obtain Bitcoins, mostly due to the hardware cost and maintenance.  But if you take out these costs using cloud mining it suddenly becomes extremely profitable. You can use a mining profitability calculator to figure how much you’d earn using this method. So everything looks OK, except you can’t always rely on these companies to deliver on their promise.

The evolution of a scam

I want to digress for a second. In the financial markets sector there is something known as “Binary Options”, heck there are even Bitcoin Binary Options. Binary Options are a form of trading in which you predict if the price of Bitcoin will rise or fall in a certain amount of time. If you’re correct you earn the option’s payoff, if you’re incorrect you lose your investment. It’s basically gambling wrapped up in a pretty name (the term “binary” comes from the fact that there are only 2 outcomes – win or lose).

The same thing happened in my opinion with Bitcoin Ponzi schemes. When Bitcoin started to gain momentum a lot of ponzi schemes came to play, the most famous one being Bitcoin Savings and Trust which managed to steal almost $40m.

What’s a Ponzi scheme you ask ?

a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

It’s kind of like a HYIP (High Yield Investment Programs) where you pay a small amount and get paid tremendous returns. Another name for Ponzi is “Pyramid Scheme” – the first people to put in their money get paid by the ones that come after them. Eventually the payouts stop and the people at the bottom of the pyramid get screwed. Just like what happened with Bitcoin Trader a few months ago.

Great! But what does all of this have to do with cloud mining?

Well, in my opinion (and in many respected others as well) most of the cloud mining companies are plain Ponzi schemes. Meaning these companies don’t actually have any mining rigs set out in a remote location and the money that you pay is used for paying out older customers and the company itself. Of course most people won’t press charges against $100 that were stolen from them, so when the company goes bankrupt or just plain vanishes all that is left are a few angry people that won’t do anything about it.

You’re just a hater! There are some good legit companies out there..

True, for example I do believe the Cex.io is legit (currently the biggest cloud mining company). But here are some recent examples of people who lost their money in such cloud mining scams.

If you’re looking for past examples look no further than BitcoinTalk’s post about cloud mining – it seems that the majority of people on that thread claim that it isn’t possible to profit from cloud Mining.

If you still want to take your chances though here are some rules of thumb:

Tip #1 – look for references

For almost every website on the web that is a scam there’s always someone who already posted about it. Either search BitcoinTalk for information about that company or go to BadBitocin for a list of the top known scams. If you’ve already been scammed and couldn’t find any reference I advise posting on one of these sites to help other users out.

Tip #2 – Go with hardware creators

If you are going to invest in some cloud mining scam, aahhhhm scheme, perhaps it would be better to look for a company that also creates their own miners. This makes it much more probable for them to actually own the mining equipment they are talking about and not just tell you that they do.

Having said that, even more respectable companies like GAW miners are being suspected of conducting scams as well, so see step 1 – look for references.

Tip #3 – Don’t invest more than you can afford to lose

Probably the most important tip – if you’re going to go into cloud mining do it little by little, and NEVER (and I mean NEVER) invest more than you can afford to lose. The way most of these companies work is that they lure you in little by little and once you get the big money in they close down without any notice. So never put any “big money” inside.

My personal opinion – buy Bitcoins

If you want my advise – stay away from cloud mining. There are too many question marks around this area to make it legit. I think that if you’re serious about investing in Bitcoin then you’re better off buying them than mining them. If you’ve had your own experience with cloud mining I’d love to hear about it in the comments section below.

Leave a Reply

34 Comments on "Cloud Mining – Profitable or an Evolution of a Scam?"

Notify of
avatar
 
Sort by:   newest | oldest | most voted
Baber saleem
Guest
Member
Baber saleem

Sir , I am totally new in this time I have approximately 1000usd please do me a favor where I should invest and earn money with monthly withdrawal . if yes please proper guide me which one software or hardware I need to purchase .

Steven Hay
Member
Member
Steven Hay
Hi Babeer, Unfortunately there is no simple answer I can give which will guarantee you monthly profits. Any service which claims to be able to guarantee you monthly profits (especially high profits!) is likely a scam! Be very careful of any service which promises easy money! See our guide for more: The Bitcoin Scam Test There is always risk in investing. If you use your money to buy cryptocurrency, then the price of that crypto may rise but may fall. You should only invest money which you can afford to lose. My personal feeling is that Bitcoin is the most… Read more »
Patrick Yannes
Guest
Member
Patrick Yannes

Rather go on Bitcoin Cloud Mining like Hashflare, CCG or Genesis-Mining. Have only recently started , and find the Cloud Mining much more pleasant . For registration via the link and this Promo-Code you will get 3% discount on the first order

1. Hashflare: **affiliate link removed**
2. CCG Mining: **affiliate link removed**
3. Genesis-Mining: **affiliate link removed**

My current Payments:
**link removed**

Greetz,
Patrick

Tamer Eid
Guest
Member
Tamer Eid

i am considering invest in hashflare.io , what is your recommendations
Thank you

Linda McCartney
Guest
Member
Linda McCartney

Has anyone heard of FutureNet? They are about to launch their “futurocoin” early in Jan.’18. There are 2 million ready to buy the coin.

Steven Hay
Member
Member
Steven Hay

Hi Linda,

I can’t say I’ve heard of it. Before sending them any money, I strongly suggest that you run their site through our Bitcoin Scam Test:

The Bitcoin Scam Test

I’m not sure I landed on the right page for them but it sure looks iffy to me.

Raghav22
Guest
Member
Raghav22

Hello Sir, I am planning to join OMNIA mining venture, which they say they partner with Genesis Mining for mining set-up and maintenance activities. This is a new company just launched. Need your opinion. The pricing starts at $100 USD with payout of 285.72 GH/S but I am thinking of $500 USD kick starter package which offers payout of 1428.58 GH/S and which is a lifetime, please suggest me Is it profitable to put my money into this venture and is it safe here ?

Steven Hay
Member
Member
Steven Hay
Hi Raghav, There are several red flags regarding Omnia. Firstly, the cloudmining industry is notorious for scams, as this article points out. Now, Omnia is a multi-level marketing (MLM) company; another industry notorious for scams. So adding together two scammy industries sounds extra-scammy, from the get-go. The second red flag is that Omnia don’t disclose their ownership. This is often done to avoid legal responsibility in the event that something goes wrong… The third, and most important, red flag is that Omnia is simply selling overpriced Genesis mining contracts. If you compare an Omnia contract for $100 which gets you… Read more »
Victor AGBADUGO
Member
Member
Victor AGBADUGO
Pls I came across a proposal proposing to me on how I can link antiminer S9 to blockchain mining network and get 40% of my initial bal in my wallet within 9hrs. Pls is this for real? Here’s they proposal I got First you open a new blockchain account, make sure there’s no transaction in the wallet,(an empty wallet) send the details(wallet ID and password) which is required for the connection to the machine, I’ll link it up to the machine, once it’s connected then u change ur password for safe purposes, fund it within 9hrs to 10hrs to avoid… Read more »
Zsofia Elek
Admin
Member
Zsofia Elek

Hi Peter, giving out your password is never a good idea, also this return seems extraordinary high which should warn you. Of course, I cannot know for sure if this is scam or legit, but it definitely raises too much red flag, I would stay away. Here you can read more about Bitcoin investments if you want to learn more about the topic: https://99bitcoins.com/should-i-invest-in-bitcoin-heres-what-you-need-to-know/

Luis
Guest
Member
Luis

any update on LEGIT cloud mining sites? thanks

Ofir one
Member
Member
Ofir one

Not really, I’d still advise to stay away from them. The only one I might consider is Ghash.io and Genesis mining.

Fred
Guest
Member
Fred

How about the bitclub network? Any review with this company? I am getting different views regarding this company.

Zsofia Elek
Admin
Member
Zsofia Elek

Hi Fred, you can check out our BitClub review here: https://99bitcoins.com/anatomy-bitcoin-scam-bitclub-network-analyzed/

Eric
Guest
Member
Eric

YEs Thanks Ofir I’m of the kind who belong in genesis mining Thanks :)
At Least i confirmed that the mining company was LEGIT!!!

LUIS
Guest
Member
LUIS

I’ve been using hashnest for a few days and it seems they really pay since its the fastest method for getting BTCs. I can attach some images somewhere if you want to see my actual benchmark. The only thing I’m worried about is to loose it all someday because the site goes away. They have also iOS and Android app.

Occrest
Guest
Member
Occrest

I am using cloudminr.io and i am happy with them. I am too broke to buy bitcoin with cash, so i had to get up the satoshies by hitting lots and lots of faucets. I reinvest my mining profits to increase hashing power. At the moment, i am getting approx 0.02126523 BTC per week with 282 GH/s, or 0.00303789 BTC average daily income. So far, i have made 0.08357302 BTC.

Yinka
Guest
Member
Yinka

Hi, occrest, I too want to know how u made so much from faucet

Josh
Guest
Member
Josh

Thanks for another great article Ofir! OCCREST may i ask how you make/ made so much from faucets? Only made 0.001BTC so far, any hints appreciated. Thanks!

CloudMining SG
Guest
Member
CloudMining SG

Hey Ofir,

Great write-up and guide for newcomers into the mining space. At CloudMining.SG We’ve only been around since May of last year and since day one transparency has been one of our biggest concerns. From a service provider’s perspective, I would be interested to hear any ideas you might have on how a mining company can best provide that transparency and trust to the community. Thanks again!

Cheers,

Neal, Co-founder

http://www.cloudmining.sg

David C
Guest
Member
David C

Nice article Ofir. keep up the good work sir.Your articles are informative, and useful.