Bitcoin mining has become very popular ter late 2018. Mining hardware like an Antminer S9 can both be difficult to find (spil they’re often out of stock) and difficult to set up/maintain.
Many people are moving to cloud mining companies like HashFlare spil an alternative to this, where you just need to pay an upfront toverfee and you get daily payouts te Bitcoin. This sounds superb – but there are associated risks that you should be aware of. This guide goes through thesis risks.
Albeit this guide focusses on HashFlare, many of thesis risks apply to any form of cloud mining.
If after reading this you still want to buy a contract (wij encourage you to do your own research too, there’s a very real risk that you might not get your money back with cloud mining), use our affiliate listig!
Cloud mining has a loterijlot of stigma around it, where many long-time Bitcoin enthusiasts see it spil a way for wealthy Bitcoin miners to con beginners into providing them money. Our view is that many cloud mining operations are indeed cons/scams, but companies like HashFlare and Genesis Mining are exceptions.
Albeit they’re very high risk still, they provide a way for beginners to get involved te mining very lightly – and with very petite amounts. Someone who’s just discovered what Bitcoin is could invest a few dollars into HashFlare and instantly be involved ter the Bitcoin mining space. An argument could be made that buying something like a USB Bitcoin miner is just spil effortless, but this does require the miner to be plugged into a laptop – and some configuration. Given the popularity of brainy phones, where te many developing countries people don’t own computers, wij don’t think the logistics of this are spil convenient spil cloud mining.
The above said, cloud mining is high risk. The aim of this guide is to explain thesis risks, so if you do get involved te cloud mining you know what the worst-case script could be.
Wij collective this guide on Reddit just after posting, and a user pointed out an significant risk related to transparency. On the 20th December, one of HashCoins management team had an vraaggesprek with JMS Vlogs where they talked about things like how they get their mining hardware and the latest issues they’ve had with withdrawals. They even welcomed users to voeling them and organise a visit to their office. See this guide wij’ve posted based on the above vraaggesprek.
On the 21st December they also posted on their blog about an upcoming redesign, so albeit the gegevens on their webstek looks very outdated, they’re very aware of public perception of them – and seem to be making an effort to improve it. Te the above vraaggesprek they even suggested they might be making a movie about their mining operation!
See their Instagram for pictures from their gegevens centers. The HashCoins management team is listed on their webstek, with associated LinkedIn profiles and blogs. For example here’s a listig from their webstek to their CTO’s blog – it’s seems to be ter Russian however, any Russian speakers can take a look at this and see if it’s legitimate.
A GitHub user named JoshuaGoode waterput together a pagina with lots of excellent research into HashCoin/HashFlare’s business practices, management &, transparency, see that here.
*Wij toevluchthaven’t bot te meteen voeling with HashFlare management spil of writing this or paid by them to write this. Spil HashFlare users ourselves wij’re very glad they’re making an effort to improve transparency – which is why wij included this section.
Switches to Active Mining Contracts
When you buy mining hashpower on HashFlare, you have to tick a opbergruimte telling you agree to their terms &, conditions. Most people tick this without a 2nd thought, but section Five of this, what they title ‘CONTRACT TERM AND MINING TERM’, raises concerns.
The final part of this states that HashCoins, the company/group that possesses HashFlare, reserves the right to switch the launch date, contract term and/or mining term for any of their contracts. This means that if they dreamed, because you agreed to thesis terms &, conditions, they would be able to:
- Switch the commence date of a contract (e.g. delay its begin by a few weeks/months).
- Switch the duration of a mining contract (e.g. switch the duration of a 1 year contract to 6 months).
- Switch daily fees.
- Potentially switch your available hashpower at any point.
This came to light te August 2018 when HashFlare switched many active open-ended Bitcoin contracts to just 1 year. For fresh customers this wasgoed fine, they knew what they were getting – but many existing customers were very angry about this.
Ter principle, this is very bad. But te practice wij think it’s very much required. Bitcoin mining is a very high-risk space with things like:
- Hacking: Any zuigeling of mining has to store mined coins te a wallet, and this wallet needs to distribute coins daily – so it needs to be integrated to the HashFlare webstek somehow, making it a big target for hackers.
- Price Volatility: Many payments made to HashFlare are te Bitcoin, so if Bitcoin’s price wasgoed to crash all of a sudden they may find themselves fighting to pay out customers for a period of time, and may need to raise fees to account for this.
Ter general, wij spil customers rely on HashFlare’s management to apply their terms &, conditions ethically, albeit they also have financial motivations where if they were to say cancel all existing contracts, they’d likely lose many customers and future revenue. The switches made ter August were likely due to difficulties getting fresh mining hardware – where by limiting contracts to 1 year hardware would become available to be re-sold and proceed generating revenue.
An interesting note is that albeit HashFlare’s terms and conditions are concerning, at least they’re very see-through and available on a dedicated public pagina. Genesis Mining for example seems to only display their ‘Mining Capacity Share Agreement’ when buying a fresh contract or looking at an existing one when logged ter. They don’t seem to have this on a public pagina, making it more difficult for a beginner to get information (albeit comparing their agreement to HashFlare’s, theirs seems to be much better).
Risk/Prize vs an Antminer S9
The entry-level cost for Bitcoin cloud mining is generally lower than buying something like an Antminer S9 (a popular ASIC miner), on HashFlare the lowest available Bitcoin contract is for $1.50. If you dreamed to buy an Antminer S9 ter December 2018 you’d be looking at inbetween $1,500-$Five,500.
This leads to an interesting risk/prize dynamic, where for cloud mining you’re able to make a petite investment – wait until you get say 50% of it back, then invest some more. This treatment minimises the amount of money you’d lose if HashFlare were to shut down or Bitcoin’s price were to crash. If you desired to make a larger investment however, spending $5000 on a HashFlare contract is very risky. If they were to shut down the next day you’d have lost all your money.
If you’d instead bought an Antminer S9, for starters you’d have total control overheen it – so the above screenplay couldn’t toebijten. But Bitcoin’s price could still druppel. If this happened, the value of the S9 would likely druppel significantly – but you’d still have it. If you dreamed you could use it for mining another coin, maybe sell some of the components from it to get some contant – e.g. you’d have this physical hardware spil a fallback, you wouldn’t be left with nothing. The catch is that running one of thesis has other risks like possible hardware failures, fire safety concerns, noise, etc.
On HashFlare you have the option to reinvest mined coins either automatically or by hand. Ter principle this is excellent, spil by reinvesting you’re able to get more hashpower – and keep up with potential Bitcoin difficulty increases. Ter practice however, every time you reinvest you only get that hashpower for 1 year – so if you kept doing this every day for a year, your hashpower would commence to expire!
A better treatment might be to reinvest intensely for a few weeks, and then to embark withdrawing money until you get back what you originally invested ter USD. Alternatively you could just withdraw 50% of everything you mine, and reinvest the other 50%. Just be careful not to reinvest everything, or if HashFlare were to shut down/Bitcoin’s difficulty enhanced too sharply – you might end up losing most of your money.
Legal Issues with Bitcoin Affiliate Programs
HashFlare offers a very good affiliate program, where you get 10% of any money referred people invest. If done correctly this can be a superb way to earn some money – wij use this to monetise our webstek for example, here’s our affiliate listig!
There are risks with this however. When referring someone to a webstek, you need to make Three things very clear, that you’re getting paid for the referral, that you’re not a financial advisor and that there’s no assure a user will earn money from this service/webstek. If you don’t do thesis Trio things and a referred user loses lots of money, they might be within their rights to take legal act against you. This can be done using a disclaimer (see the bottom of our webstek for example), or by posting this information near where you’re sharing the affiliate listig, albeit recall, wij’re not financial advisors! This is a topic you should do lots of research into, spil it will vary a loterijlot depending on your country.
Contract Profitability Depends on Coin Price
This can be a difficult concept for beginners to understand. Wij’ve made a cloud mining zakjapanner to make it a bit lighter. The main concept is that when you buy a mining contract, it’s for a specific algorithm. If you wielded a miner yourself, you could mine any coin that uses this algorithm. On HashFlare, their system determines this for you – wij assume mining the most profitable coin.
This is made more ingewikkeld spil prizes on HashFlare aren’t given ter the coin you’re mining, they’re given te Bitcoin. So the amount of USD you’ll get from this depends on the exchange rate inbetween the coin you’re mining and Bitcoin day-to-day. If Bitcoin’s price goes up, you’ll get less of it. Identically if Bitcoin’s price goes down and you’re holding your mining prizes te it, by the time you withdraw it and convert it back to USD it might have gone down a very large amount. Identically it could also go up – but it’s good to be aware of the skeptical view!
Te this guide wij’ve attempted to address all of the concerns wij’ve seen around HashFlare, focusing on their terms &, conditions ter particular due to controversy around it back ter August 2018. If you think wij’ve missed something significant, get ter touch here! Wij remain hopeful for cloud mining long-term.
See our rekenmachine for potential profitability of HashFlare contracts. Alternatively, an independent developer linked us to a rekenmachine they made permitting reinvestment schemes ter HashFlare to be forecasted (wij’re not associated with this developer, so use at your own risk – but it looks to have some superb features).
DISCLAIMER: This webpagina cannot substitute for professional investment or financial advice, or independent factual verification. This guide is provided for general informational purposes only. Anything Crypto is UK-based and not regulated by the FCA (Financial Conduct Authority). The group of individuals writing thesis guides are cryptocurrency enthusiasts and investors, not financial advisors. The ideas introduced are our analysis, learning & opinions on a range of cryptocurrency topics. Trading or mining any form of cryptocurrency is very high risk, so never invest money you can’t afford to lose – you should be ready to sustain a total loss of all invested money.
This webstek is monetised through affiliate linksaf. Where used, wij will disclose this and make no attempt to hide it. Wij don’t endorse any affiliate services wij use – and will not be liable for any harm, expense or other loss you may suffer from using any of thesis. Don’t rush into anything, do your own research. Spil wij write fresh content, wij will update this disclaimer to encompass it.