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Bitcoin and cryptocurrency mining has become a very competitive industry, and the amount of processing power hashing away to mine these digital assets is truly amazing. However over the years since the inception of GPU and ASIC mining, essentially when home mining turned into an industry, the cryptocurrency mining space has been riddled with fraudulent operations and people pretending to be massive mining facilities when they don’t even own a single miner.
Also read: Altcoins Are Dying
Phony Crypto-Mining Rigs & Massive Facilities: The Tale of Mining Vaporware
If you know about cryptocurrencies then you surely have heard about mining and the mega-competitive industry that surrounds this process of minting new digital assets like bitcoin, litecoin, and ethereum. Between the BCH and BTC network alone, miners are processing an average hashrate of 45 exahashes per second. However, over the years there have been a lot of fraudulent individuals and operations within the mining industry claiming to be something their not.
We recently wrote about some sketchy blockchain projects that send cryptocurrency publications press releases, and these clown projects get front page articles even though their operations are pure vaporware. In the mining sector, there are some shady operations that profess they have a huge facility with thousands of SHA256 miners churning away at the bitcoin network, but there have been many instances where individuals have found these warehouses filled with miners don’t even exist. Some of these fraudsters have even used pictures of other people’s mining operations so they can make people believe they have a facility filled with ASIC miners.
GAW Miners and Hashlets
A few years ago a lot of people from the cryptocurrency community were scammed by the firm GAW Miners and its related companies. The founder of GAW Miners Joshua Garza started out as a simple mining hardware reseller, and suddenly claimed to own massive mining facilities and the company started a cloud-mining operation called “Hashlets.” There was one big problem, the operations were seemingly faked with photoshopped pictures, and his projects were bolstered by a mess of lies pushed by Garza and his associates. Of course due to these factors of fabrication, the company’s cloud-mining products called ‘Hashlets’ never paid out. The US Securities and Exchange Commission eventually charged Garza with fraud and running a Ponzi scheme.
Hashocean’s Exit Scam
Another shady venture that started in 2014 was another cloud-mining operation called Hashocean. The Hashocean team for years claimed to have six super-large mining farms located all around the world, and for a year or so it became a very large business operation as far as contract sales were concerned. Then two years ago in July of 2016, the company abruptly halted all payouts and the site silently went offline. Hashocean was then accused of being an ‘exit scam.’ Moreover, even though the operation lasted two years according to Bitcoincloudmining.org, Hashocean had a horrible reputation for paying out, even when the site was alive and well. After the site went down so-called core members of the Hashocean team claimed they were ‘hacked’ and promised to allow withdrawals but nothing ever materialized.
Fabricated Mining Rigs
Another prevalent scam is when people promote a new mining machine that supposedly outperforms every mining rig on the market, but the machine doesn’t really exist. Just like some legitimate mining manufacturers, scam machine sellers have a pre-order for their first batches of super-efficient miners. Back in May of 2017, news.Bitcoin.com caught three shady websites that were all interconnected selling fabricated mining devices. The machines did not exist, but the websites and the people behind them sure did, collecting a couple grand worth of BTC per miner for devices that will never ship out. Foxminers, UFO Miners and Minerslab all sold the same machines with different logos but the logos were photoshopped on older miners manufactured in the past like Zeus Miners.
‘The Largest Miners’
Even now pretend mining operations are still using the same old smoke and mirror tactics to make themselves look bigger than they are. For instance, to this day there are many sketchy press releases sent to cryptocurrency publications that consist of firms claiming to be the biggest data centers in Canada or the US. But there are never any pictures sent with these press announcements, and the locations of these facilities are never truly publicized, but yet these firms always claim to be the ‘largest mining facility in North America.’
If people can’t verify that these mining operations actually exist, and a press release claims to be the region’s largest crypto-mining facility by capacity, and publications print this garbage based on faith, then something is wrong. The cryptocurrency industry has a bunch of sketchy people, and some of them claim to be mining behemoths.
If one was to google, “the biggest bitcoin miners in North America,” the person would find there are many firms who claim to be the areas largest operations. Who is the largest mining operation in that region? — Is it Bitfury, Hut8, Gigawatt, Hashflare, Coinmint, and the many others who have claimed to be the biggest? Without true transparency, real-time documentation of the facilities, and actual witnesses it is likely some of the ‘biggest miners’ in North America and other regions around the world are all talk.
The moral of the story is when it comes to mining operations, if it can’t be proven it’s likely someone blowing smoke. A few years ago the financial publication Business Insider’s Rob Price got a tour of the Genesis Mining firm’s mine located in Iceland. Marco Streng, the Genesis co-founder, explained at the time that mining operations have a “major trust issue.” Streng tells Price back in June of 2016:
[Some miners] don’t ever even own their own mining facilities. They just take pictures from other companies, Photoshop them, then pretend they are theirs.
What do you think about miners pretending to be more than what they really are? Let us know what you think about this subject in the comment section below.
Disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.
Images via Shutterstock, Pixabay, Bitcointalk.org, and the Foxminers scam.
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In today’s edition of Bitcoin in Brief, we cover two decentralized exchanges – an Irish team that’s launching its Local Token Exchange and the already operating Bancor that has reported a security breach and admitted the loss of $ 12.5 million worth of coins. Also, hackers in China have mined cryptos worth $ 2 million using malware installed on 1 million computers, and in the US, digital forensics firm Chainalysis claims a fifth of all bitcoin is missing.
New Decentralized Exchange Launches Next Month
Two Irish entrepreneurs are behind a project to set up a new decentralized crypto exchange in Europe. Joe Haslam and Conor O’Connor plan to launch Local Token Exchange (LTE) in August, according to the Irish Independent. The platform aims to enable trading in over 100 cryptocurrencies by the end of the year. It has already gathered a team of nine employees and six advisors.
O’Connor notes that most crypto transactions currently take place on centralized exchanges while there are very few decentralized trading platforms operating at the moment. “Our approach is peer-to-peer and it democratizes the process. Our transactions take place using smart contracts and escrow,” the cofounder explains.
His partner, who lectures in entrepreneurship at the IE Business School in Madrid, says: “When my students look at what’s happening in Venezuela, say, or the fact that the Turkish lira lost 20pc of its value against the dollar this year, I lose their interest very quickly talking about the traditional worlds of finance and accounting when crypto allows a 21-year-old to raise $ 25m in 15 minutes, as Reuters reported last year.”
Hacked Decentralized Exchange Freezes Coins
While the Irish team is still raising the funds to complete their project, another crypto exchange branded as decentralized proves that maintaining an operating platform of this kind comes with challenges. On Monday, Bancor reported it had experienced a “security breach”. In a tweet, the company assured its customers that “No user wallets were compromised” and informed them that the platform is currently under maintenance.
Updating users on the situation, the exchange later said the details of the breach are still being investigated but released some of the findings. According to the tweeted statement, a wallet used to upgrade some smart contracts has been compromised and used to withdraw ethereum from the BNT (Bancor’s native token) smart contract. The stolen amount, 29,984 ETH, is worth approximately $ 12.5 million.
Here is the latest update on the recent security breach: pic.twitter.com/JroypFvBri
— Bancor (@Bancor) July 9, 2018
The post details that “The same wallet also stole: 229,356,645 NPXS (~$ 1M) [and] 3,200,000 BNT (~$ 10M).” Bancor claims that “once the theft was identified, we were able to freeze the stolen BNT”, explaining that the ability to do so was built into the Bancor protocol to be used in an “extreme situation.” However, the exchange notes that it’s not possible to freeze the ether or any other stolen coins.
The heist and Bancor’s countermeasures prompted comments on social media questioning the decentralized status of the hacked crypto exchange which doesn’t square with the centralized freezing of tokens and shutting down the network.
Chinese Hackers Mine Over $ 2M in Two Years
Police in the Chinese Da Lian city have arrested 20 suspects, employees of a computer tech company, who allegedly infected over 1 million computers with mining malware. According to the local news outlet Legal Daily, they reportedly mined more than $ 2.2 million USD worth of digital coins over a period of two years.
The publication details that the hackers developed and embedded the malware in plugins promising faster browsing speeds and other “improvements”. It has been estimated that the ads have reached 5 million computers in the People’s Republic. The hackers also employed a network of more than 100 agents to spread their malicious software.
According to the Chinese investigators, more than a million users have installed the plugins so far. The hackers have mined a total of 26 million units of digibyte, decred and siacoin worth around 15 million yuan. These altcoins do not require a lot of computing power and background mining is harder to detect, the article notes.
$ 20 Billion Worth of Cryptocurrency Lost
According to a research conducted by New York based company Chainalysis, about a fifth of all bitcoin is missing. The total amount of lost cryptocurrency, mostly bitcoin (BTC), is worth $ 20 billion dollars, The Wall Street Journal reported. The blockchain-analysis firm says the main reason is the loss of access to the funds as a result of users failing to securely store their wallets or remember their passwords and secret phrases.
Chainalysis does not help people find their lost bitcoin, its senior economist Kim Grauer said. The digital forensics firm noted, however, that it can point out “at least one counterparty for 80 percent of all bitcoin transactions.” It has been reported as well that the US Federal Bureau of Investigation (FBI) has successfully tracked down almost $ 1 billion in lost cryptocurrency revenue in the last two years.
At the end of 2017, Chainalysis published a similar report claiming that access to almost 3.8 million bitcoins might be permanently lost. Wallet Recovery Services, a company that helps users remember passwords to their crypto wallets, claims it has about a 30 percent success rate.
What are your thoughts on today’s news tidbits? Tell is in the comments section below.
Images courtesy of Shutterstock.
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