Genesis mining: Is it a scam?

in #cryptocurrency8 years ago (edited)

Part of my foray into cryptocurrency: Cloud mining

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With the deluge of crypto profits, can I "make it rain" for myself?

Intrigued by the idea of mining crypto, I decided to give it a shot in my previous post.

However the speed is painstakingly slow. At the time of this writing, I have mined $0.42 in Pascalcoins on my own. To me, the idea of cloud mining had me seeing green. I had seen the site "Genesis mining" promoted a lot on the site, and I just had to dip my toe in and buy a contract. It was easy enough to register an account and make my purchase through bitcoin. Several days ago I took the plunge, and I hope to share the results with you.

I'll start by saying that I treat this as gambling, not an investment. I thought it would be cool to buy a contract to mine DASH by spending BTC. Trading one crypto to mine another, pretty sublime right? I spent BTC 0.02 on it ($40 Canadian) as my buy-in and received 5 mega-hashes per second of that sweet baby X11 algo.

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So what I basically did was trade $40 in bitcoin for a 2-year contract to mine another crypto. Daily payouts seemed like a good idea but now looking back on it, with transaction fees on every small amount it seems foolish. I have heard about cloud-mining scams before and frankly, the business lends itself perfectly to creating scams.

Is it profitable?

Who knows, there's so many variables. One thing you should realize is that payouts will not be consistent, and generally will shrink over time as the difficulty increases. That being said, I start to wonder whether it would be more profitable just to buy and hold DASH instead of mining it? My 0.02 BTC I spent on Pi day to get the mining contract is worth a little less now, so buying and holding that would have resulted in a slight loss at the time of this writing, but we can only compare 2 years from now. I'm guessing the return of just holding the pure bitcoins could be higher, but only time will tell.

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Sick payouts man! Ranging from $0.13 to $0.20 every day paid in DASH

Lowest payout yet! 0.001307 DASH today

Close to a week out, I have about $1.00 in DASH so far paid out. Only 39 weeks left till I break even, at this rate! It definitely beats a GIC or bond, but that remains to be seen.

Red flags of scams

As a natural-born skeptic, I have a keen sense for bullshit and lies. Things like JFK being killed by a lone gunman, or weapons of mass destruction hiding in Iraq never quite passed the smell test for me. I'm the kind of person that needs hard evidence or proof to believe something. So I dove head-first into this to see for myself, whether you can make money mining on the cloud.

1. Paid referrals

This is probably the biggest red flag to me. Much like a 1-tier pyramid scheme, people are given extra mining power to refer their friends to the tune of 3%. This tells me their profit margin is much higher than 3%, and also that they have plenty of hashpower to spare. I can see how organic referrals might be a good way to grow a small business, but I don't want to pay for other people's hashing. I made sure to sign up without any referral code because the goal of my experiment is to see if it's profitable or not without any bells and whistles, without becoming a cheerleader for a company that I don't trust yet.

2. Super shady e-mail asking for positive reviews

About a few days into my mining contract, I received an e-mail in my inbox from Genesis asking to write a review of their service in exchange for a 3% discount on my next purchase. I thought "That's stupid, how am I gonna review this before even getting 1% of my investment back?" so I attempted to write an honest review. The second I clicked 2 stars out of 5, the weirdest thing happened. The e-mail deleted itself from my inbox. I have never seen such a trick before in my life. I checked my trash folder and there it was, so I attempted to write something in the review box. I started off with "It's a scam, save your" and before I could type any further, BAM. The e-mail literally vanished into the ether. That's some high-tech javascript man.

3. Based in Hong Kong.

I have nothing against China, in fact I've been there and enjoyed my stay! That being said, the business address given is:

Genesis Mining, Chinachem Century Tower, 31/F,178 Gloucester Road, Wanchai, Hong Kong

I realize lots of businesses are based in Hong Kong, but I also worry about the heavy-handed manipulation of crypto markets by the Chinese government. I doubt they would want to slay a cash cow like Genesis Mining, but the mining industry doesn't exactly have the seal of approval from the Chinese Communist Party.

4. Possible ponzi?

That being said, ponzi schemes are as old as time. No doubt previous cloud-mining companies have been. The idea is "robbing Peter to pay Paul", with newer investors like myself contributing funds to pay out the daily fees of other miners. I'm not saying Genesis in particular is a scam, but the business model could conceivably keep going until they run out of referrals. At that point all they are left with is rapidly-aging ASICs and GPUs. I would beware of businesses that have this kind of structure.

My bottom line:

Current profits: $-38.95 CAD

but still hopeful. kind of.

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Your better off doing a little bit of research and putting your money into new coins like Iota, Neo, Civic etc... etc.... You only need one to go big to make a lot of $$$$$ .. playing the long game

@edje first trading experience and now yours
I am learning ....every day more and it's fun.
Nice write up.

So you see how quickly you can learn? Steemit is great, but one shall also stumble upon posts like this, which is I think more the truth than the soooo many other posts about mining that are tooooooo positive. I agree with @stonedfood, one can also buy the coins, eg Dash as oppose to start mining Dash like this guy from the video you send me is trying to tell... his enormous increase in value has nothing to do with his mining but all to do with the increase of value of the Dash coin, but he is so enthousiast in the video that you (read also: I) are not taken the risks and negatives he is mentioning to serious.
Read also my other comment to the post.

Very interesting. I am learning every day a little bit more but mining is for sure not my field of interest. Steemit is better to collect some STEEM. I will see your other comment.

Thanks for your insights!!

Coinstaker shows top 10 of mining : https://www.coinstaker.com/cloud-mining-monitor/paying-cloud-mining-services/ ROI starting from more than 400 days to more than 8.000 days. That doesn't seem like a good deal.

I really was considering to get a mining contract, due to the soooo many positive posts here on Steemit, but I still didn't get one because of the Coinbase table and the thing you also mentioned: increase of difficulties in mining, reducing the revenues per difficulty level. Also, your funds are kind of stuck for 2 years, no possibilities to take it out.

In fact, in my very short experience with super short term trading, one can make a whole lot more profit. Must say, with trading one can also loose everything again when not be very very careful, ie wait until the time is there to buy/sell and spend a whole lot of hours on it (per day) and be very sensible and leave emotions out of it completely.

I was super interested in getting into this earlier... thanks for the post it sort of solidifies my wariness. I guess if you break even in a year and then are making a small profit after, you're not doing too bad? I think I have read somewhere that to really make a lot of money, you have to keep trading the money you're getting out and renegotiating contracts and whatnot... I'll stick to steemit for now lol.

I guarantee you'll make more cryptocurrency posting on Steemit for a month vs. what this will earn.

It's a more fun way for me

Thats what I figured.

I have the same question. I've been planning to recap the first 6 months of my mining experiments. Here's a post I wrote about one of them https://hackernoon.com/why-did-i-just-buy-that-zcash-mining-contract-f7700501dde4

Now I am really glad I did not bite on this one....Will stick with Steemit. Thanks for the review.

Nice write up, look forward to updates. Dropped however much it was to get 25 gh on x-11 for dash. So far a little under a dollar a day.. best case scenario is dash goes up past 150 and 200 in the future

You should have taken that $40 & invested all into Steem/Burst ;)
But yeah it's a scam but you have to know how to play the scam! Wtch some of Craigs vids and he will tell you how to go about it, one tip being that you should reinvest 0nce a week and so forth.
AND it's about what you do WITH the daily payouts ;)