Cloud mining is a service that offers an alternative to the actual mining process which has become too expensive for an individual to carry out. Cloud mining involves getting mining contracts offers which by-pass is having to manage the hardware. Because of the simplicity and cost-effectiveness, more and more people have been lured to join cloud mining.
However, honest money makers are not the only lot that cloud mining has attracted. There has been a shift in equal measure of unscrupulous providers who have established a number of mining websites that also claim to offer mining contracts and yet do not. That site that you have been yearning to join might be a scam.
Cloud mining scams
There are numerous services that promise cloud-based cryptocurrency mining. Whilst there may be a few sites that help the user to earn crypto depending on the contractual terms stated in the contract, there are several suspicious sites that turn out to be outright scams. Here are a few red flags to look out for:-
- Unregistered domain name. When no name of the real user is shown, and the domain name is also not revealed, then that is a clear red flag that something might not be right. By not registering the domain name, activities cannot be tracked. Once the intended unscrupulous deal is accomplished, such websites disappear into thin air, leaving no trail.
- Company name. To disguise their lack of a domain name, these unscrupulous providers will register a company name in a large city like London to give an illusion of prestige. However, the Directors are nearly always foreign meaning that their identities are shrouded in mystery as forged documents are readily available abroad.
- No indication of Proof of Payment. This is one of the key indicators of whether the site might be legit or a scam. If the proof of payment is not outlined and when requested for evasive attempts are made in the form of other documents, then it is time to run for dear life. This is definitely a scam.
- False payments. This is where the deception comes in and might get even the very enlightened caught up. To appear honest and trustworthy, initial payouts are made possible through a seemingly legitimate address. However, client deposits are circulated from one client to another and since this chain is not sustainable especially if there are not as many new users joining it become unsustainable and collapses.
- Focus on promotion. These providers will use all manner of promotional platforms to broadcast themselves with grand promises but give no substantive details as to their mode of operations and even the kind of equipment they use. When this is observed, then it is better to keep off.
- Grand promises. The saying that if the deal is too good then thinks twice holds true for scam cloud mining sites. Huge profits within a short period of time are a signal to watch out.
- Reviews. When a cloud mining website without a domain is jammed with favorable reviews, it is wise to tread cautiously. This is because any website who will verify such a site is clearly opportunistic and will do it to direct the flow of traffic in exchange for huge sums of cash.
- Legal jargon. The contract details are normally outlined, but because of the fine print they are written in, most people browse through it lightly without actually absorbing the contents. In these contents could be terms that are detrimental to the investor who will only see a terminated contract without having earned as promised.
- Caveat Emptor. The investor should not sit back and relax that they are on an earning ride without doing much activity. The industry is very volatile and the margins very thin, so a seemingly stable company could go out of business in a flash. Buyers beware.
If one or more of the above is observed, it is better not to invest in the first place with such.
Different type of scams
Scams come in different forms.
- Scam coins. These are coins created by schemes which aim at getting rich quickly and are worthless to the buyer cum ‘miner.’
- Mining Rigs. This is the deception of an App that will double the cryptos balance in the wallet if one provides the private key. This is mostly used on newbies who have not articulated the importance and privacy of the private key. This might seem too basic, but there are those who fall for it thus the caution.
- Contracts. These scams come in the form of terms that are attractive in order to lure investors only to be terminated in the event that they become unprofitable without prior warning to the investor. Some providers trick investors by owning the contracts until they can break even before making payouts. In other words, they have no fall back plans besides that from the investor’s
Top 3 Cloud mining scams
Money has been lost in cloud mining scams. Among a host of many others, here is a list of the top 3.
- GAWminers. This was a Ponzi scheme owned by one Homero Joshua Garza. It started off well, but the filth was unveiled when PayCoin was introduced as part of its platform. Garza took off with millions of dollars and has never been located to date.
- HashOcean. Though not a Ponzi scheme and operated for over a year with prompt payments, once the announcement to relocate their data centers was made, it has never been heard of again.
- Cointellect. This company offered decent daily returns and went on a rampage to recruit members. This in itself should have set the alarm off, but the deal was too irresistible. Money was lost never to be recovered.
In conclusion, scams are not the preserve of the cryptocurrency industry, but every other industry has their fair share of them. A good background search of the sites with the intention of detecting any of the telltale signs as has been listed above on whether it is legit mandatory. Caution should be exercised in money matters, and as someone aptly put it, money matters are not matters of fancy but facts.