How To Identify A Bitcoin Or Ethereum Cloud Mining Scam?

Recently updated on October 25th, 2022 at 11:03 am

Cloud mining has quickly become the most popular alternative to mining Bitcoin cash with your own equipment. It’s a lucrative proposition that allows almost everyone to get in on the crypto mining industry without having to invest a lot of money upfront.

However, there are also many scams since it’s easier to scam users that don’t have access to the equipment or the workers maintaining it. It’s important to do your research and make sure the provider you’re working with is reputable.

1. Look for Reviews

Before you decide which one to use, look for the bitcoin mining sites reviewed on platforms such as Truely. That way you can base your decision on the real-life experiences of those who have used their services before. Since there’s no trial period when using a cloud mining site, these reviews are essential in finding the one that will suit you.

It’s useful to have an understanding of what kind of features you’re looking for in the first place in order to make the most use of the reviews. A complete novice can invest in crypto mining but those with a deeper understanding of the matter could have an easier time profiting from it.

2. Promises in Regards to Hash Rate

The most common scam in the field of crypto mining comes from overpromising hash rates. In layman’s terms, the hash rate will determine how fast a crypto coin can be produced. The more computing power you have the faster you’ll earn. Many bitcoin mining sites overpromise in this regard and you end up not getting the service you’ve paid for.

This is where reviews can also come in handy since others can use them to warn you about the scam they’ve encountered.

3. Promising High Returns

If you notice a cloud mining site offering high returns, chances are that they can’t be trusted. Cloud mining sites can promise the number of coins they can mine but not their value since they can’t affect it. The value is determined by market forces and it’s rather volatile.

Truth is that Bitcoin is doing well in the long run and that it’s been on the rise for the past five years even when you take into account the ups and downs. However, a mining company can’t promise you anything regarding value.

4. Being Vague about Equipment

Image source: investopedia.com

When using cloud mining you can’t expect to get control over the equipment and software that’s being used. The only thing you can get is an open and honest representation provided by the mining site. That’s what users will base their chaise on. If you notice that a provider is rather vague about what kind of equipment they are using – it’s best to stay away.

However, some providers will avoid going into details in order to remain approachable to investors that aren’t tech-savvy. This is why carefully researching a cloud mining service is so important.

5. Personal Information

You’ll need to relate some personal information in order to use cloud mining services. These include your credit card information, your email, and your e-wallet information. All of these can put you at risk at least somewhat if they get into the wrong hands.

It’s another common type of scam. The mining companies can use your data to withdraw funds, but more commonly they can also sell it to third parties for advertising and algorithm building purposes. There are ways to protect yourself from it, but the most important thing is that you’re aware that it’s happening.

6. Tax-Related Issues

Some cloud mining companies promise that using their services means you’ll be exempt from paying taxes on the profits you’ve made. That’s one of the main attractions of using cryptocurrencies. However, now that their usage is more common, many governments are taking note and taxing Bitcoin and Ethereum profits just like any other.

Regardless of these innovations, a cloud mining company can’t promise you a stance on tax policy since that’s not something they can influence. If you notice such a promise from a cloud mining provider, chances are they can’t be trusted and you should avoid using their services.

7. Leave Reviews

Leaving reviews after you’ve used a cloud mining site helps a lot since it allows others to learn from your experience. Take the time to do so and you’ll provide valuable input for others that are trying to find their way into the industry you’re now a part of. It’s especially important to do so if you’ve had a bad experience with a cloud mining scam.

It’s best not to stick to simply rating the cloud mining service. Instead, you should go into detail and explain the problems you’ve encountered and how you got scammed if you did. It can help someone avoid a bad cloud mining provider in the future.