Cloud mining has become one of the most popular ways for individuals to generate Bitcoin and Ethereum. With cloud mining there is no need to purchase or maintain expensive mining equipment. All the individual needs to do is buy a contract which gives them a certain amount of hash power in a mining pool. Sounds great,right?
Unfortunately not all cloud mining pools are on the level. Cryptocurrency is something that lends itself to scams, and some cloud mining scams exist. Those who are considering a cloud mining venture should stick with reputable companies like Genesis Mining that have been reviewed by Cryptoswede.
What is the Purpose of a Bitcoin or Ethereum Cloud Mining Scam?
These cloud mining scams have one solitary goal – to separate you from your hard-earned money. It is easy for these scammers to attract individuals who are looking to make a profit from Bitcoin. Many of these individuals see cryptocurrency as a get-rich-quick endeavor. It is not so. The volatility of the Bitcoin market and it’s remarkable increase in value during 2017 have drawn many new investors to the market. Some of them seem to think that getting rich with Bitcoin is as easy as buying a mining contract and watching the profits roll in.
Cloud mining scams prey on these individuals by selling them bogus mining contracts that have no real potential to show a profit. Some scams might even sell fraudulent contracts for mining equipment they don’t even have. One of their methods is to make the contracts cheap so that almost anyone can afford them. For less than $20 a month these companies convince people that they will be receiving a large amount of tokens each month.
Thankfully, there are several ways that you can spot a Bitcoin or Ethereum cloud mining scam. Here are some of the most common.
A Lack of Transparency
Most Bitcoin cloud mining scams are characterized by a lack of transparency about their ownership structure. They make it very difficult for someone to determine who is actually behind the company. The websites they use will typically be registered to someone that is an agent for the domain registrar. They do not provide physical addresses of the company, and there are no board of directors that can be located.
A Refusal to Show Mining Equipment
This should be a big red flag to anyone that is thinking about buying a cloud mining contract. Any reputable company should be able to provide proof that they own mining equipment. Some will refuse on the grounds that they keep their equipment in a secure location. They could still show the equipment and not reveal where it is kept. Always demand verification of the equipment when you purchase a contract.
They Have a Ponzi-like Structure
For a cloud mining scam to work the scammers have to keep investors on the hook for a while. This means that they will often set aside funds from new contracts to pay investors something. This is done to make it look like the venture will be profitable. Sooner or later, just like Bernie Madoff, there will not be enough money left to pay new investors in this way. But by the time people realize they have been scammed the loss of money could be substantial.
Fake Marketing Materials
Scam cloud mining companies will often produce misleading or false marketing materials. They will produce videos which claim to show leaders of the company, former clients, and so forth. These companies will also use scam Bitcoin review sites to demonstrate the legitimacy of their operation. The scam review will give them very positive marks in the hopes of sending them new customers, and the reviewers will be given a kickback for doing this.
How to Avoid a Bitcoin Cloud Mining Scam
You can easily avoid a Bitcoin cloud mining scam by turning to a site like Cryptoswede for trusted cloud mining reviews. We do all of the hard work for you. We test each company we review to determine things like potential profitability, cost, and customer service.
The results of our reviews are then made available to anyone for free on our website. We are even transparent in saying that we do have affiliate partnerships with some cloud mining services, but we only seek partnerships with companies that have a good reputation for honesty.
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