5 Common Bitcoin Cloud Mining Scams and How to avoid them

November 17, 2019 - Expert Commentary, How-To Articles

Bitcoin Scams

The reason Bitcoin erupted into a mega-network serving millions of users and businesses globally lies in its value proposition. Once a small fringe network, Bitcoin has and will continue to outperform expectations. In fact, Satoshi Nakamoto, the elusive founder of Bitcoin, must be watching this network, a juggernaut, operate, and is undoubtedly astounded by the enormous force the little seed has grown to be. 

Bitcoin can be authoritatively said to have spawned other digital currencies, alternative coin, or simply altcoins. Altcoins broaden the experimentation base further. After all, Bitcoin’s source code is open. Bitcoin was a proof of concept. It worked, and the result, 11 years later, is a multibillion-dollar enterprise with each coin worth several ounces of gold, a digital version of the precious, scarce asset it was christened after.

Bitcoin Ownership and Your Responsibilities

Leading cryptocurrencies continue to revolutionize and disrupt processes-much to the chagrin of banks and financial institutions. Unfortunately, other fraudulent opportunists have similar vigor in tarnishing the name of crypto. Yes, Bitcoin transactions are not reversible. And there are no password resets. Once sent to the wrong address, you don’t have a centralized redress to get it back. Unless, of course, the developer community decides to press the reset button and execute a USAF to reverse transactions back to the rightful owners. Binance’s CEO proposed that. However, the community could hear none of it. But that is beside the point. Bitcoin, as a digital settlement layer, is the safest in the world. It has the backing of billions of dollars of the best Bitcoin mining equipment from all corners of the world. 

This coin has the proverbial two sides. Unfortunately, some novice Bitcoin owners and traders have lost millions through scams. Fraudulent entities set up ingenious traps and hacks due to security lapses by the coin owner or the custodian, that is, an exchange. Approximates have it that investors lost as much as $33.5 million through such schemes in the UK alone. This figure is according to statistics from the Financial Conduct Authority (FCA), the country’s watchdog. 

Thanks to the irresistible allure of get-rich quick-schemes and Ponzi schemes, owners of BTCs are prime targets. How can one avoid elaborate scams not only advertised through flashy fake lifestyles but also deceptive cloud mining platforms? First, awareness is critical. Businesses that accept crypto and exchanges that serve many functions under one roof do put a lot of resources into education. Secondly, due diligence has been emphasized-and indispensable. Nothing beats caution and trusting that “gut” feeling. 

Staying Ahead of Scams

We’ll specifically focus on what to do to figure out cryptocurrency mining scams and remain on the safe side. Staying one step ahead of scams and fake sites can be the difference between financial independence and splitting hair in despair. Scammers are evolving every day, refining their willful techniques.  For this reason, it is not rare for users to encounter fraudulent activities around fake mining contracts sold by near-authentic sites with top-rated reviews from paid-and sometimes rogue marketers. 

That is when it can get complicated, and with the “rush” to get in–FOMO, scammers take full advantage. It is also a reason why investing in any asset, not just Bitcoin, demands a deep understanding of the asset’s key drivers. To that end, conducting in-depth research and analysis from a genuine site are vital before investing or buying a mining contract of any form.  

A fundamental part of avoiding falling prey is understanding the psychology of these scammers. Note that the Bitcoin and cryptocurrency market has evolved since inception 11 years ago. Gone are the days of CPU mining, and ASICs are still pricey. Not many would-be and interested enthusiast miners can directly participate in securing the network. This shortage is because of an array of different factors, including the cost of electricity and the unavailability of these high-demand ASIC miners. Furthermore, the fluctuating BTC prices sometimes make Bitcoin mining untenable. 

Adding that to the fact that more than 80% of BTCs are already in existence, it shows how the coin is in high demand. Combined, these make it extremely easy for the gullible to fall for ingenious scammers always on the lookout opportunities. This scarcity means Bitcoin cloud mining can be the only choice for many, but within that funneling tunnel, floors can become slippery for beginners.

Top 5 Tips on How to Avoid Bitcoin Cloud Mining Scams

Here are the top 5 tips you can use to determine the authenticity and validity of a site that claims to be a legit Bitcoin cloud mining provider:

  • Scam cloud mining websites don’t register their domain names under a real user. That is, their domains run as anonymous.  Sometimes, they never reveal the site’s domain name and instead opt for acronyms. The absence of a domain name, the equivalent of the internet’s book, should be the first siren because without it, how can normal users identify the real sources of the site? 
    Often the lack of a proper domain name comes with the lack of a public address. A public address is a sign of legitimacy and evidence that the company is providing a hash rate for clients, legally.
    To ascertain whether the address is legit, it is good practice to request the provider to sign blocks. Their inability to do that means they don’t own the address too. Alternatively, a request to redirect the purchased hash power to your preferred mining pool should raise more questions. 
  • There is a website, true, but it lacks photos, essential records of their data mining facilities, and their investment—arrays of ASICs nicely stacked in their warehouses. If there are none, a user can rightly request for them, and if none are forthcoming and accompanied by odd excuses, the best advice is to run! A legitimate Bitcoin mining company, can-and should always have photos and videos of their ASICs in operation, complete with details of their data center location. Sometimes, and going the extra mile, legitimate companies provide details of their electricity bills to eliminate any room of doubt from the potential customer.
  • Publishing photos of directors who are not associated with the project. It’s a tactic that has been used to great effect. Impersonation of leading crypto figures for traction, is first, a criminal offence. 
    Before investing, take your time, and check whether individuals listed as core members of the team exist in person and represented by an active social media account. Do the groundwork and check their social media links and if their accounts are less than three months—or are unrelated to the site, steer clear.
  • Advertisements that seem to guarantee absolute returns within tight timeframes or unreasonably high-and attractive referral commission, are a red flag. The crypto mining scene is getting harder every day. Companies and deep-pocketed investors are interested and set up to get involved with Bitcoin, an exciting proposition.
    Increased competition coupled with low margins; absurd, above-market rates promises through referral commission don’t add up. In such a competitive environment, you should immediately raise questions if there are promises of 5%+ on commissions paid. 
    Beware, scamming cloud mining providers often use such lucrative referrals to hook in unsuspecting and well mining Bitcoin Cloud miners. Besides, the fluctuating nature of Bitcoin prices mean the promise of guaranteed, fixed returns every day or week, is far-fetched and false. Mining firms claiming such are most likely scams.
  • The lack of a chipset manufacturer vendor support is another warning. It is easy. Legitimate Bitcoin cloud mining providers with legal data centers should have direct support with the ASIC manufacturer. 
    Up-to-date ASICs don’t come cheap, and out of appreciation, the firm should have direct vendor support. Sometimes, the manufacturer could take to social media and acknowledge their direct support through free public posts. 
    Usually, the purpose of this post is to acknowledge and to demonstrate to the world that the cloud mining firm is one of its main clients—considering the level of initial investment. As such, for legitimacy, most Bitcoin cloud mining providers would request the manufacturer’s acknowledgment in the highly competitive market place.

Mine Bitcoin Confidently, Settle for US Based Data Facilities

These are some of the few ways of spotting a fake cloud mining facility and the first steps to avoid being scammed. Often, fraudsters run fake websites with attractive user interfaces and falsifying their association with influencers. To stay on the safe lane, always verify. Check their registration location, their “About Us” details, and their registration locations. Do they have proper licenses from government agencies? If yes, good. 

We recommend sticking with trusted and established hardware mining providers, especially those permitted to set base and operate from the US. VBit Technologies is one such hardware mining provider. It has the necessary licenses to operate from the regulatory stringent United States. Details of ownership are laid down clearly, without doubt, complete with their LinkedIn details

Not only are they advocating transparency and are pro-regulation, but they have also sponsored ecosystem-benefiting events like the Blockshow Asia in 2018. Besides, they are active and with a publicly shared headquarters located at 1625 Washington Ave, Philadelphia, PA 19146. 

Registration is easy. Sign up and start mining Bitcoin today.

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