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Hashflare, One of the Largest Cloud Bitcoin Mining Companies, Abruptly Disables SHA-256 Mining Contracts, Leaving Customers Furious (twitter.com)
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.
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.
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.
Oh wow, the editors actually read your comment and fixed the summary...
Are pigs flying?
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.
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.
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.
OK editors, using little endian date formatting in the summary now? That makes me furious! News for Nerds demands ISO 8601!
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.
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.
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.