There is no denying that there are lot of companies in the scrypt cloud mining industry which are launched with the sole intention of defrauding their customers. Since its inception, Bitcoin has been plagued by scammers that have cost customers millions of dollars.
We wanted to do a post to help new Bitcoin users. Time and time again, we see the story posted on forums and social media: a new user found a cloud mining company online, paid money, and now have nothing to show for it. Looking at the big picture, this doesn’t just hurt that one user, it hurts the entire ecosystem.
We didn’t write this post today to tell you to come to Genesis Mining and that we are the best. The purpose of this post is to give you questions that you should ask yourself before giving your money to any mining provider, including us.
We are a young industry and it is our responsibility to protect new and current users from those working in this industry with bad intentions. The best way to do that is with education.
So, before selecting a bitcoin company, ask yourself some of these questions and look into some of these issues. We cannot totally eliminate the existence of fraud, but we can give you some resources that will help you avoid becoming a victim.
1.Longevity doesn’t mean legitimate.
A mining company that is set up as a ponzi scheme doesn’t have to open and close overnight. There is no way for you to pull your money out, so they will keep on doing business long after you’ve realized you’ve been scammed. That means that a company with 10 months of mining history isn’t necessarily legitimate — keep researching.
2. Pics or it didn’t happen.
Datacenters are large operations and you can prove they exist by taking pictures of them. If your mining company isn’t sharing photos of their operation, start asking questions.
3.Look for the Asic endorsement.
If a cloud mining company does real business, then they have had to work with an Asic vendor before. These vendors freely give out endorsements to their customers as a form of self-advertisement. A mining company can easily acquire one. No Asic endorsement should raise red flags.
4. Beware the discounts.
Remember that in the world of Bitcoin mining, margins are everything. A company that is laser focused on customer acquisition by giving out huge referral discounts (anything upwards of 10%) should give you pause. That’s a sign of a dangerous (possibly devious) business model.
5. There should be nothing to hide.
Do you know the people who operate the mine? Are they forthcoming with their identities? A classic sign that you’ve stumbled onto a scam is that the operators go to extreme lengths to conceal their identities. Look for transparency!
6. Do they accept credit cards?
Merchant processing is not easy to get for a Bitcoin mining company. The process can be tedious and involves being attached to a real identity so if they are only accepting anonymous crypto payments, this can be a potential red flag to watch out for.
7. Are they out and about?
Are the founders or staff regulars at events? Are the constantly contributing to the overall growth of the cryptocurrency industry?
8. There are no guarantees. This almost seems to obvious to say, but it’s been tried before, so we’ll warn you anyway. A company that guarantees you profit from mining is selling you lie. No one can predict what the exchange rate will do or what will happen with Bitcoin next. Guarantees should make you suspicious!
9.If it’s too good to be true…
As the saying goes, if it’s too good to be true, it probably is. Are they promising returns far above anyone else in the industry? While profit is the objective, it’s important to always consider if what they are promising is simply too good to be true.
Following these guidelines won’t eliminate the possibility of being scammed, but it will reduce the chances.
Here are three additional resources to check before investing with a cloud miner:
We wish you the best of luck and happy mining : )