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Hashflare, One of the Largest Cloud Bitcoin Mining Companies, Abruptly Disables SHA-256 Mining Contracts, Leaving Customers Furious (twitter.com)

Posted by ryuzaki0 on from the how-about-that dept.

Hashflare, one of the largest bitcoin mining companies, said on Friday it is disabling its SHA-256 hardware and also discontinuing support for mining services on the active SHA-256 contracts. The move comes as Hashflare continues to struggle with generating revenues, the company said, putting the blame on market fluctuations. In an email to active customers, the company added: For over a month our users encountered a situation when the payouts were lower than the maintenance fees, resulting in zero accruals to the balance. As of 18.07.2018, the payouts were lower than maintenance for 28 consecutive days. BTC mining continues being unprofitable, in light of which we would like to inform you that on 18.07.2018 (July 18) we were forced to start disabling SHA hardware and today, on 20.07.2018 (July 20), stop the mining service of active SHA-256 contracts in accordance with clause 5.5 of our Terms of Service, which are required to be accepted when creating a purchase and are the basis of concluding the contract. We expect that the cryptocurrency market situation will stabilize in the nearest future and we will be able to offer our users new advantageous solutions. Customers are understandably furious.

48 of 84 comments (clear)

  1. To whom it may concern... by Fly+Swatter · · Score: 3, Insightful

    Our pyramid is built, it is no longer in our best interest to take your money. But don't worry, we are scouting the land to start a new pyramid.

  2. ostensibly by Luthair · · Score: 1

    Ostensibly means:

    apparently or purportedly, but perhaps not actually.

    Which doesn't exactly make sense when directly linking to people complaining

    1. Re:ostensibly by TFlan91 · · Score: 2

      Oh wow, the editors actually read your comment and fixed the summary...

      Are pigs flying?

  3. This is the way it is supposed to work by 110010001000 · · Score: 2, Interesting

    If it costs more to mine the BitCoin then mining will stop until the price of BitCoin rises. Once BitCoin rises to a certain level it will start mining again. Free market at work. In fact, it might be a good time to buy BitCoin now, since it price will rise.

    1. Re:This is the way it is supposed to work by Megol · · Score: 3, Funny

      Want to buy my supply of delicious vintage radium water? Good time to buy as its price will surely rise. /s

    2. Re:This is the way it is supposed to work by bobbied · · Score: 4, Interesting

      If it costs more to mine the BitCoin then mining will stop until the price of BitCoin rises. Once BitCoin rises to a certain level it will start mining again. Free market at work. In fact, it might be a good time to buy BitCoin now, since it price will rise.

      The problem here is that at some tipping point, lack of mining operations will increase transaction times which will make BitCoin unattractive because of it lacks liquidity, taking too long to verify transactions. This could cause it's value to plummet further and mining operators to flee to more profitable work. Transaction times for BitCoin have been pretty long of late, making active investment in BitCoin *really* difficult to do quickly. Waiting an hour to see if your trade is confirmed, or paying extra fees makes it all that harder to turn profits and discourages investors.

      So, this problem may just spell the end of BitCoin should we reach some tipping point...

      I don't think we are at that point yet, but I'm also not sure your flashing the buy signal is advised either. Admittedly, I've never been a fan of BitCoin specifically (or crypto in general); I think it's way too volatile to make it into an "investment", BUT if you want to gamble some cash, BitCoin might be better odds than a Vegas craps table.

      --
      "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
    3. Re: This is the way it is supposed to work by reanjr · · Score: 1

      It would hurt, but it would not fail. That's the power of a decentralized platform. Most platforms die with their corporate sponsors.

    4. Re: This is the way it is supposed to work by reanjr · · Score: 1

      We're far from the tipping point. The institutional operators have different classes of hardware. They shut down the inefficient ones, but have plenty of newer ones to handle the network until the next difficulty adjustment. The price would have to fall far and fast (even for BTC) for a mining difficulty network collapse to take hold.

    5. Re: This is the way it is supposed to work by Train0987 · · Score: 2

      We're far from the tipping point. The institutional operators have different classes of hardware. They shut down the inefficient ones, but have plenty of newer ones to handle the network until the next difficulty adjustment. The price would have to fall far and fast (even for BTC) for a mining difficulty network collapse to take hold.

      Wait, so "institutional operators" basically control the space now? What happened to that decentralization thing that was supposed to be the entire purpose of bitcoin?

    6. Re: This is the way it is supposed to work by Anonymous Coward · · Score: 1

      Same thing that happened to the anonymity, and freedom form regulation by government. It never actually existed.

    7. Re:This is the way it is supposed to work by ahodgson · · Score: 1

      That's not how Bitcoin mining works.

    8. Re:This is the way it is supposed to work by sexconker · · Score: 1

      That's the exact opposite of how it's supposed to work.

      If you think difficulty/prices is going to rise, you keep mining/buying now while it's low.

      What's happening here is a large network has already invested $ into mining and established contracts for a fixed $ that is no longer profitable.
      They're hoping to manipulate the network by pausing operations and waiting for difficulty to fall before they jump back in.

      Pausing operations may send prices up in the near term, but it won't be until the difficulty adjustment that things normalize.
      Being speculators, they don't care about the network, they don't care about the currency, they only care about profiting off of other speculators.

      If people are panicky idiots and the price rises before the difficulty adjustment happens, then they can profit off of those panicky idiots.
      If people don't panic and the price doesn't rise before the difficulty adjustment happens, then they lose out.

    9. Re:This is the way it is supposed to work by sexconker · · Score: 1

      If every miner stopped today, they network would adjust the difficulty down, down, down, to the point where a single miner on a desktop PC could quickly process the low volume of transactions for the whole network and start farming up BTC. As transaction speed increases, volume increases, and so does the perceived value of BTC.

      Whether or not Bitcoin would rebound and become as popular again after a panic is unknowable. Its decentralized and resilient nature has a lot of value, and I think it will remain healthy and relevant for a long time to come.
      Would such a panic kill Bitcoin? Not at all. The network doesn't care about its own popularity at any given time, or the price people are buying / selling BTC for in other currencies.

    10. Re: This is the way it is supposed to work by sexconker · · Score: 1

      Bitcoin was never designed to be anonymous. It's a PUBLIC LEDGER OF TRANSACTIONS.

      Which government has successfully stopped people from using Bitcoin?

    11. Re: This is the way it is supposed to work by sexconker · · Score: 1

      Wait, so "institutional operators" basically control the space now? What happened to that decentralization thing that was supposed to be the entire purpose of bitcoin?

      It's still in play.

      The decentralized nature of Bitcoin means that you need a large percentage of computing power to attack the network.
      You need a majority of the total computing power in order to manipulate transactions (give yourself more BTC).
      With a plurality, you could certainly disrupt shit for a time.

      But the block chain is public. At any given point, people can look at the transactions and decide that an attack is happening, then take their ball and go home by forking the block chain. Leaving the attackers with nothing of value.

      Forking the block chain is like making your own block chain (with blackjack, and hookers). And it's been done before.
      People just then have to choose which network to trust, or they can trust both. You'd have 2 different coins with 2 different networks and 2 different perceived values.

    12. Re:This is the way it is supposed to work by Aaden42 · · Score: 1

      The problem here is that at some tipping point, lack of mining operations will increase transaction times which will make BitCoin unattractive because of it lacks liquidity, taking too long to verify transactions.

      That's not how any of this works... If there's less compute being thrown at mining, the difficulty level of each subsequent block drops until the total compute in play is able to solve blocks in an average of 10 minutes. (That's Bitcoin. Others have different algorithms.)

      Mining resources aren't the problem, and mining isn't even a part of the services Coinbase offers. Coinbase's primary offering is an exchange to fiat currency. If the exchanges fall, the inability to easily convert crypto to fiat will affect the perceived value of the currency as it would effectively become less liquid. It's got nothing to do with the mining compute though.

    13. Re:This is the way it is supposed to work by CoolCash · · Score: 1
      As of right now, the fastest and cheapest transaction fee is currently 12 satoshis/byte For the median transaction size of 225 bytes, this results in a fee of 2,700 satoshis (about 19 cents). Paying this much will get you into the next block, your transaction will be verified within 10 minutes. This is how Bitcoin works. Also, every two weeks Bitcoin re-balances its difficulty with hashrate to keep it at around 10 minutes per block. So if the hashrate goes down, the difficulty will go down, this then makes current miners more profitable per hash.

      ... making active investment in BitCoin *really* difficult to do quickly.

      Making an active transaction on an exchange is instant, like GDAX. This is done off chain. Finally.. Its Bitcoin, not BitCoin.

    14. Re:This is the way it is supposed to work by Kaenneth · · Score: 1

      https://support.coinbase.com/c...

      Cash balances held in your Coinbase accounts belong to you - not Coinbase.

      If you are a United States resident, your Coinbase USD Wallet is covered by FDIC insurance, up to a maximum of $250,000.

      Even if Coinbase were to fail as a business, the funds held in the custodial bank accounts could not be claimed by Coinbase or its creditors. The funds held in those accounts would be returnable to Coinbase’s customers.

    15. Re:This is the way it is supposed to work by Carnildo · · Score: 1

      If every miner stopped today, they network would adjust the difficulty down, down, down, to the point where a single miner on a desktop PC could quickly process the low volume of transactions for the whole network and start farming up BTC.

      If every miner stopped today, Bitcoin would die. Difficulty isn't adjusted based on time, but on blocks mined. Specifically, after every 2016 blocks, the difficulty is adjusted up or down by no more than a factor of 4. With nobody mining, the difficulty is never adjusted, and the required computing power to re-start the network is the same as it was when the shutdown happened.

      Bitcoin can survive gradual changes in available computing power, but not rapid shifts.

      --
      "They redundantly repeated themselves over and over again incessantly without end ad infinitum" -- ibid.
    16. Re:This is the way it is supposed to work by sexconker · · Score: 1

      Technically correct (the best kind of correct). I wasn't literally referring to all miners stopping at once, but a large, asymptotic fall off. Bitcoin would survive that.

      I made another post discussing Hashflare's decision to pause operations. The gap between adjustments is the space in which they can manipulate the market and play hokey-pokey (you turn your miners off, you turn your miners on, you turn your miners off, and you shake em all about) with hashing power. If other speculators see their actions and panic, Hashflare can profit when they reenter. If not, they've simply sat idle for no reason.

      But if literally EVERY miner stopped instantly I reckon I'd hear about it and I'd start mining again and get some others in on it. (Assuming the reason for the exodus wasn't a fork where everyone had just moved on to the forked blockchain, or actual government crackdown where merely mining Bitcoin gets you thrown in jail.)

      Yeah, we'd need a sizeable investment to get to the next adjustment, but once there it'd get easier quickly. If miners truly stopped instantly, there should be a lot of cheap used mining hardware on the market. The issue then becomes electricity. The risk is other players with big mining farms noticing my group's interest and then moving back in and dominating our hashing power.

      On one hand, increased interest makes our venture more profitable. On the other hand, if we're outright dominated and we never get to take advantage of the downward difficulty adjustments we triggered, then we just subsidized the power bill of the big boys.

    17. Re: This is the way it is supposed to work by reanjr · · Score: 1

      No. If you read it with your comprehension enabled this time, you will see that institutional operators help protect the network integrity.

  4. Re:I bought at $50.00 a coin by CaptainDork · · Score: 1

    Had . Had is the word you're looking for.

    You commented on this thread because you use(d) Hashflare.

    Google the word, Had .

    --
    It little behooves the best of us to comment on the rest of us.
  5. how is this business work? by fattmatt · · Score: 1

    I'm confused with this business... is the intent the fee per hash pays for operating costs (including hardware/electricty/facilities/humans) ... then the maintenance fee is skims profits off the coins mined?

  6. Re:I bought at $50.00 a coin by Train0987 · · Score: 1

    Nobody believes you.

  7. Complaining customer wrong -- buy don't mine by perpenso · · Score: 5, Insightful

    The complaining customer are wrong. If fees exceed revenue the miners should be shut down.

    Now the mistaken customers may be thinking they are willing to accumulate and hold until prices recover but they need to do some basic arithmetic. If they take the money they would spend on fees and just buy coins on the open market they will end up accumulating and holding *more* coins than if they continued mining. Their risk is the same, their potential payoff of their gamble (holding) larger.

    Nothing is stopping them from accumulating and holding. They just seem mistakenly fixated on doing so in the less "productive" manner.

    1. Re:Complaining customer wrong -- buy don't mine by HornWumpus · · Score: 1, Funny

      Sunk costs and kids. Always ends the same way. They're mentally committed.

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
    2. Re: Complaining customer wrong -- buy don't mine by reanjr · · Score: 2

      This is the great Bitcoin Miner's Fallacy. So many do not understand the basics of what they're doing.

      I talk to people all the time who talk about buying a GPU rig and finding a coin to mine. I always tell them the same thing: buy BTC instead. None of them do. None of them get much farther than "I can print money like a real hacker!"

      The ones who make it a few steps farther end up paying for losing mining rigs.

    3. Re: Complaining customer wrong -- buy don't mine by Anonymous Coward · · Score: 1

      Similar story here. My variation is that you should be buying the GPU for non-mining reasons, gaming, GPU programming, etc. Let it mine when the machine would otherwise be asleep, power costs permitting profitability (power consumption measured at the wall with a kill-a-watt or something similar). Its a "let mining subsidize what you are buying anyway" thing, not a "free money" thing. At most maybe buy the next card up in performance, maybe get a GTX 1070 rather that a 1060.

  8. Re:I bought at $50.00 a coin by HornWumpus · · Score: 1

    He didn't say he had 1000 bitcoins. 1000 'coins', could be pennies, could be some worthless cryptocoin, could be 1,000,000 zimbabwe dollar or worthless Venezuelan commie coins..

    --
    John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
  9. Re: The allure of *coin? by reanjr · · Score: 1

    The allure for me as a developer is the fact that I can setup payments for an app using open standards. As many have said before, payments are a protocol that has been long missing from the Internet.

  10. Re:So long traditional banks! by HornWumpus · · Score: 1

    Crypto currencies can be both a bad place to store wealth and a great way to avoid capital controls.

    Mining is a separate issue.

    --
    John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
  11. Not abruptly by Asgard · · Score: 1

    Since this was in the TOS, it wasn't abrupt -- it was a 21 day countdown. One oddity; 5.5 says "The Mining process continues until said mining is profitable." Seems like that should actually say "_while_ said mining is profitable".

  12. Its Pretty Much Just Fraud by nateman1352 · · Score: 3, Informative

    One of the many big problems with bitcoin and cryptocurrency in general is that the bitcoin whales own so much of the available coins that it enables collusion between a very small number of people to result in massive changes in the price of bitcoin. This makes the bitcoin market ripe for "pump and dump" securities fraud.

    Without a doubt, at least one of the bitcoin whales works for Hashflare, and was aware of the planned timing of the most recent "pump," which happened 3 days ago. Hashflare's customers bought and paid for 1 year contracts ahead of time. Hashflare used that up-front money to buy all the ASICs and GPUs to set up their mining data center. Now in theory, the contract is established obligating Hashflare to transfer all of the mined bitcoins to their contract holder's wallets for the next year. But now that the most recent pump was pretty successful... they would rather keep those coins for themselves and reap the profits that rightfully belong to the people who took the risk of buying their contracts up-front. Never-mind that they wouldn't have all that mining hardware if it wasn't for the investors that bought their contracts. This is blatant securities fraud, these guys should go to jail for it.

  13. Decentralization ended with ASICs by perpenso · · Score: 5, Insightful

    Wait, so "institutional operators" basically control the space now? What happened to that decentralization thing that was supposed to be the entire purpose of bitcoin?

    Decentralization ended with ASIC mining hardware displacing CPUs and GPUs. We are far removed from the point in time where ordinary users with ordinary computers were in control. For years control is centralized in *one* particular authoritarian country that is not known for a hands off approach to things. Something around 60-70% (IIRC) of the hash rate occurs in its border and is dependent upon cheap government supplied power. We've also had mining pools approach the 51% attack hazard. Something that was assumed to be "impossible" as the network grows.

    The theoretical foundation of Bitcoin no longer matches reality, the risk of blockchain manipulation by government or cartel is now quite plausible.

  14. little endian makes me furious by xaosflux · · Score: 3

    OK editors, using little endian date formatting in the summary now? That makes me furious! News for Nerds demands ISO 8601!

  15. Re:I bought at $50.00 a coin by Xnet+Project · · Score: 1

    In the realm of crypto-currency.. At the rate that the volatility value is falling, it probably wouldn't be a bad idea to cash out while there is still a profit. Just like most markets, profits can always take a hard dip with little to no profit recovery.

  16. Re:You bought at $50 but lost control of wallet .. by sexconker · · Score: 1

    I mined a little over 10 BTC around 5 years ago.
    When the price jumped to $100 I sold 10 and got $1000 and reported it as income on my taxes. It felt great.
    I got bored, threw the change I had away at some Bitcoin gambling site, and stopped mining.

    Then the damn things went to $1000 per coin and I wished I had waited to sell and wished I hadn't stopped mining. I looked into mining again, but my hardware was no longer profitable and I didn't expect it to go past $1000.

    Then the damn things kept going up and up. FUCK!

    I never lost my wallet file, I never forgot my password, I never used an online wallet aside from what was necessary to sell and instantly cash out, or what was necessary to deposit on a gambling site then cash out, nothing was seized, etc. Rule #1 of Bitcoin is treat your wallet like cash.

  17. Re: The allure of *coin? by Sarten-X · · Score: 2

    Have you actually seen the Internet protocols?

    BGP was designed on a pair of napkins. SMTP is a pile of hacks on top of workarounds laid over a protocol that was never supposed to handle important messages. HTTP has evolved to become the de facto face of the Internet... and a large portion of its traffic is just a wrapper around JSON data because JavaScript doesn't get raw socket access. It's taken three tries to get hostname resolution to its current state, and even that's rife with problems.

    I love the Internet as much as the next guy, but frankly, it only works because a lot of people have made a lot of band-aid patches to accommodate the last four decades of problems. Payment processing is one thing I'm quite happy to keep in an ivory tower, knowing that if someone screws it up, there's a whole army of lawyers coming to make their life awful.

    Now, this isn't to say there aren't any problems in the traditional payment-processing systems... quite the contrary. There are a lot of issues with those systems, but the folks running those systems usually have a greater financial interest in keeping those systems running smoothly than they have in exploiting the problems for immediate profit.

    --
    You do not have a moral or legal right to do absolutely anything you want.
  18. Re:I bought at $50.00 a coin by PopeRatzo · · Score: 1

    ... My grandma and Your grand-ma were sit-tin' by the fireHey now.

    --
    You are welcome on my lawn.
  19. serves me right, I guess. by irving47 · · Score: 1

    I'm not bitter about it because I learned a lesson.. HF did not "screw" me over in that they did, in fact, pay out when my minimum amount/balance of BTC was met... I did lose 80% of my investment, though.

    My fault for not completely understanding the difficulty increases and how that would affect the ROI. TBH, I probably didn't read the contract closely enough, because I ended up relieved that they weren't trying to charge me out-of-pocket for the maintenance fees on the contract. Instead, they simply charged the btc balance on the account.

    --
    I had a sucky sig.
    1. Re:serves me right, I guess. by mysidia · · Score: 2

      This is why most of the "Cloud Mining" operations are scams --- they want to impose unreasonable maintenance fees on a regular basis; and they're disconnected from costs, essentially a huge markup, and now they want to abort mining if the BTC exchange rate makes it unprofitable for them? Screw that.

      A fairer thing to do would be to charge the maintenance fee upfront based on actual cost. E.g. for a 365 day contract: approximately 100 Watts/Terahash = 2.4 kWh per day * 365 = 876 kWh per TH. At about $0.09/kWh: $78 US for Electricity, $40 in cooling costs.

      Pay upfront $118.00 in "maintenance" per TH; $3000 in Hardware will buy 16TH, so that's about $187 in equipment costs.

      So charge your customer $305 US per Year times number of Terahashes upfront plus a reasonable markup for a 12 month contract, and adjust down equipment and power cost for newly sold contracts when equipment and power gets cheaper per TH/s: So you both win, sort-of, and there's no way market fluctuations in BTC value affect the maintenance costs or cause an early abort in the project, and in a year you walk away with ~0.04 BTC
      assuming you spent none of it -- who knows what the market value will be at that time, but that mostly sets your profitability.

  20. Re:I bought at $50.00 a coin by vtcodger · · Score: 1

    Right, Sell. .... ehrrrr ... To whom?

    --
    You can't see ANYTHING from a car, You've got to get out of the goddamned contraption and walk...Edward Abbey
  21. Tulip farmers discontinue Tulip shipping by WillAffleckUW · · Score: 1

    Read all about it!

    Tulip markets overvalued, based on tulips being more than pretty flowers.

    --
    -- Tigger warning: This post may contain tiggers! --
  22. Re: The allure of *coin? by WillAffleckUW · · Score: 1

    Which side of the bridge are you selling?

    The underside, of course.

    --
    -- Tigger warning: This post may contain tiggers! --
  23. Re:I bought at $50.00 a coin by Kaenneth · · Score: 1

    Your ignorance is showing.

  24. Re:I bought at $50.00 a coin by Kaenneth · · Score: 1

    $7300 each on the open market?

  25. Re:they must have had good lawyers by Luckyo · · Score: 2

    Then perhaps you should read it instead of showing that you have no idea what it says? It's not even a long clause, and quite clearly spells out what are the conditions for acting the way they did, and they are quite clearly defined.

  26. Re: The allure of *coin? by reanjr · · Score: 1

    Look up what an open standard is...

    I have no desire to feed into a system where 1-3% of the wealth of nations flows into the financial industry just because people are really bad with small numbers.