Mining Bitcoin in the cloud is like renting a money printer and yes, it’s bizarre

Cloud mining, or remote cryptocurrency mining, is a contentious topic. Using a remote server to mine currency for you seems perfect for people who don’t have the money or time to set up a home operation, but it also seems a bit too good to be true. If a cloud mining company just mined Bitcoin itself, wouldn’t it make more money?

To find the answer to some of these concerns, and to learn more about cloud mining in general, we reached out to HashFlare’s head of public relations, Edgar Bers.

Digital Trends: What is cloud mining?

Edgar Bers: Cloud mining is using hashing power to make calculations […] remotely. Like you would do when you render something. You may buy a cloud service that uses video cards to render something, or when you create a website and you need a web server where you put the files where you use for your website, you store them somewhere remotely. Cloud mining is kind of the same way.

Many people see cloud mining as a sure fire way to make money. Do you consider HashFlare as an investment system?

“For god’s sake, we are not an investment platform.”

We don’t feel that HashFlare an investment platform. You may consider it so because you put money in one end and get money out the other, but for us it’s just hosting a service. We host hardware, you purchase hashing power and you mine [with] it. We don’t care what you mine, what you do, we legally just provide you with rent of equipment and that’s it for us.

Many people say that cloud mining is a form of making profit and capital gain. We have never promised any profit, and we cannot, because it is not for us to say what is the Bitcoin price or Bitcoin difficulty, especially now after the rally where bitcoin grew as high as 20k and now it’s just over 10 and may fall over (it did) […] There is a lot of “fud” in the cryptomarket, a lot of speculation. For god’s sake, we are not an investment platform.

This is not a market you want to offer investment options in. If you want to mine, you want this risk, here is how to buy the equipment. It’s already connected, if you want it, here you go.

Editor’s Note: Edgar did later state later that all HashFlare users do make a profit of some kind. “At the end of the day, every contract resulted in a positive dollar profit,” Bers said. “However, simply holding money in BTC is practically the same in terms of dollar profit. Especially if you get in at the right price.”

HashFlare hasn’t always been a cloud mining company. How did it begin?

HashFlare started in 2013. We were developing and selling hardware for mining Bitcoins, but soon we realized that shipping equipment is not really the best way to go. You can never be sure about delivery, that the equipment won’t be broken when it arrives. The second thing is trust, when you pay a lot of money, $2,000, $3,000 and must wait a month or two, you start to get nervous if it will arrive in time. It also incurs other problems like shipment costs. You may order a miner from us, it will cost $2,500 dollars, but at the border control you have to pay extra tax, because you’re importing electronics or machinery.

“[We have to] wake up at night if something shutdowns overnight.”

After that we decided that we should probably think of another way to sell the hardware, and it was back then we developed the remote mining platform.

At that time, when we tried to push that model to the public [though], we got more questions about how to use the system than actual orders. So we had to get back into the thinking bubble and ended up with HashFlare

Cloud mining isn’t like owning the hardware yourself, or buying cryptocurrency on an exchange. How does it work?

There is mining equipment that stays in the datacenter. It mines, it does the operation, it mines Bitcoin. Bitcoin comes to our, so to say, central wallet. It’s not an individual customer’s wallet. It’s a central wallet that’s cold. We keep it private and secure so that no one can hack it. If you have a contract with us, it means that you have a certain amount of hashing power which equals to certain amount of cryptocurrency mined per, for example, day. In order for that equipment to mine, we have to provide electricity, the network, we have to get rid of the dust, we have to create the ventilation systems, manage everything. [We have to] wake up at night if something shutdowns overnight, electricity cuts off – maintenance work, technical operations. These operations are part of the maintenance fee.

#bitcoin #ethereum

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In HashFlare you have your user account. There you have this number for how much hash power you have, what’s your balance, and so on. That’s just a number though. It’s not real Bitcoins, it’s just a number that you have. The Bitcoins are kept in our cold storage. Once you request a withdrawal, the money is sent from our cold storage to the wallet that you put into our system.

We mine it, we store it, then we pay it, and we take out the maintenance fee for mining, storing electricity, and everything.

Bitcoin and cryptocurrencies in general, are quite a volatile commodity. The last months of 2017 saw huge swings in value. How do such rises and falls affect your business?

Obviously when the Bitcoin price is rising, we see a lot of new customers buying. When the Bitcoin price is falling, we see an influx of blame coming towards us. Since we are working in quite a young market and most of them see us as a money generation source, they think they just throw money into their screen and the next day they are millionaires. That’s fine, I’m not here to teach people, I’m just here to show them what’s happening at our end.

Our business model is not really damaged, we are not suffering from Bitcoin fluctuations because we have been working for over four years. We don’t spend all the cash that we earn. We have money to pay for our support people that we accumulate before crisis, like prices lowering, Bitcoin difficulty not lowering.

Some governments and financial bodies, especially in countries like China, have instigated regulation or blocks on the use or trade of cryptocurrencies like Bitcoin. Are you concerned about such regulation affecting your business?

We are not providing Bitcoin mining, we are providing hashing power for rent. That’s it. If they said you are not allowed to do that, under that regulation services that provide hashing power to video rendering would also be damaged. That’s why we think that would never happen.

“Bitcoin is not really good for money laundering because it’s pseudo anonymous.”

We are most concerned about regulations that affect keeping hardware and consuming electricity. Because regulations are applied to the bottleneck where the trading for money is happening. Cryptocurrency exchanges, they get the first hit as they are the point in the community that allow for you to pay for something – to take money, to exchange money, that’s a regulated practice. You need to have KYC (Know Your Customer) there. I think we are also going to need to have a KYC procedure. I don’t know 100 percent, but I think considering what’s happening, we will one day need to know every customer who is giving us money and getting cryptocurrency from their mining […] to make sure that there is no money laundering involved.

[However] just half a year ago, the FCA in the UK, said that Bitcoin is not really good for money laundering because it’s pseudo anonymous. You have wallet numbers, all transactions are on the Blockchain, there are blacklists of wallets. If you have bitcoins that are associated with blacklisted wallet address, from half year ago, your bitcoins might be seized if you tried to withdraw them in fiat.

There are a lot of schills, scammers and hackers in the world of cryptocurrency. Some would suggest that cloud mining itself is a scam. What do you say to those people?

Everyone at every corner, every regulator, every government, especially every banker, they love to say that Bitcoin is a scam. If you are investing in Bitcoin, next year you’re going to lose all your money. Guess who’s going to earn that money? I bet bankers have Bitcoins, they just don’t tell anyone.

That’s probably the reason we must be so accurate when we say what we are doing, because it’s all about how it’s perceived. If you take money for charity that’s a good thing, but if you just take money and spend it on yourself, that’s technically charity, but you’re not helping anyone. It’s a game of terms of how you name things how you present them not just to customers but also to regulators.

Even when we say what kind of return on investment (ROI) you can expect, we always mention that all these calculations are made using open source calculators and these numbers are valid on the date of calculations. The next day you see an email from us saying that there is a new ROI you need to follow the links and recalculate to be sure. The volatility of this market practically doesn’t allow you to become an investment provider. You cannot be sure of anything.

Some people have wondered why cloud mining companies like Hashflare don’t just mine for themselves. Surely you would make more money if you didn’t share the profit with your customers?

If you consider hosting, electricity, rent – if we could pay for everything, for all the commodities that are required to mine, if we could pay in Bitcoins, then it wouldn’t be a problem. We would be mining just for ourselves, but we have people to maintain this system. We have to pay rent for the datacenters, we have to pay to our support agents. Even I am here because I receive a salary or else I would work somewhere else. To generate money that could be used for our day to day operations, you need classical funds like Dollars and Euros. So that’s why we sell it.

“I bet bankers have Bitcoins, they just don’t tell anyone.”

Obviously, we mine for ourselves as well, using the hardware that is not sold. Because whenever you buy hardware form HashFlare, there is no red signal somewhere. We don’t run with the miner and connect it. It’s already there, it’s already mining. We just reallocate the profits.

What does Hashflare have planned for the future?

Hashflare 2.0. Another thing is we are thinking of maybe adding more cryptocurrencies for mining, but the problem is there are no cryptocurrencies to add that are worth adding. There is Bitcoin Cash, but it’s not really Bitcoin, it’s not really cash.

What do you think the future holds for Bitcoin and other cryptocurrencies?

Regulations didn’t kill stock markets 100 years ago. Didn’t kill the mortgage market 10 years ago. Regulations are not to kill, but to save people from losing funds. At the end of the day, non-professional investors are still going to lose money, because the hype is too much, everything is too much right now.

It really feels like the whales are trying to shake the weak hands who are going to sell [right now] to have this small drop. Cryptocurrency business will hit one trillion capitalization this year, that’s for sure. And in order for that to happen, huge capital has to get in.

More than 85 percent of Bitcoin is in 0.5 percent of wallets. You can imagine what the distribution rate is here. I am more than sure the same distribution is within any market. If that’s true, then well, we’re going to see these whales come in. When they do, when they come in, we’re going to see capitalization grow by a lot.

Updated 03/01/2018 – Tweaked text to add a clarification from HashFlare.


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