What is Mining?
Mining is a terrible name for what actually happens. The easiest way to understand it is that miners are computers that do “accounting“. This involves turning the computer on 24/h and running a special program. The program then performs “accounting” for a particular network (eg Bitcoin or DASH). This involves putting real-time transactions that happen on the network into a “Ledger” (called the Blockchain). The network then rewards the “accountant” aka miner some currency. It’s all based on a very complicated series of policies and rules, very much like real life accounting.
Cloud mining refers to the renting of bitcoin mining hardware set up by companies in professional data centers. The mining equipment is usually all professionally setup and cannot be modified by the user. Users usually by “contracts” that sell hash power instead of actual machines (although there are some cloud miners that rent actual machines and rack space).
Review of top cloud mining providers:
Genesis-Mining Bitcoin Contract Review
Genesis-Mining is based in Iceland and has provided the most evidence for the existence of its mining operation. Their data-center page contains videos of wide angle sweeping shots of its data centers, along with their employees installing bitcoin mining gear. Iceland also has one of the cheapest electricity costs at 5.54 US cents per kWh (source wikipedia). Read our full review here.
Known Scams/ Stories
Bitcoin Cloud mining is vulnerable to Scams and Pyramid schemes. Uninformed investors will find themselves penniless if they purchase into a pyramid scheme. Cloud mining operations take money upfront but only offers a return on investment after years of mining (or even longer!). Boxmining encourages everyone to read up on scams and how they operate. This is the best way to guard against pyramid schemes and scammers.
Unlike traditional financial investments, cloud mining is not protected or regulated by any government agency.
Sometimes it is difficult to even track down the address cloud mining provider.
Here are some stores of cloud mining scams:
- HashOcean Scam : Hashocean was a bitcoin cloud mining service that claimed to have 5 major data centers along with a team of mining experts to manage it. They even had a 24 customer service hotline to support to their 700,000 customers. All of this was revealed to be a scam.