According to an announcement posted on its Facebook page yesterday, the cloud-mining service Hashflare has shut down almost all of its mining operations. The site is still functional, but as of now, Bitcoin, ZCash, and Dash mining contracts are listed as “out of stock.”
Hashflare and other cloud-mining services work by allowing users to rent time on mining equipment remotely. Since it is not necessarily profitable to mine crypto independently, cloud mining is a popular but risky alternative. Cloud mining services require payment up front, but don’t require any work from the user.
Of course, independent and cloud-based mining efforts can run into the same problems. Due to increases in mining difficulty and unpredictable price volatility, it can cost more to mine than one earns by doing so:
For over a month [Hashflare] users encountered a situation when the payouts were lower than the maintenance fees…As of 18.07.2018, the payouts were lower than maintenance for 28 consecutive days.
Users had some warning that the shutdown would happen, as Hashflare announced that mining was unaffordable in mid-June. It was stated in the terms of service that Hashflare would terminate its services if mining was unprofitable for 21 days. Hashflare customers on social media continuously anticipated a shutdown, with one user closely predicting the event 3 months ago.
Making matters worse, it is not clear how many Hashflare users have access to their funds. Immediately prior to the shutdown, Hashflare introduced a KYC procedure, in which users who provide identity are afforded higher withdrawal allowances. However, many customers claim that it is not possible to withdraw due to technicalities on the platform (although this has always been a complaint).
Some users are able to withdraw funds, but there are daily limits, and there is no way to tell how long Hashflare will continue to function. Ethereum mining contracts are listed as “limited stock,” so Hashflare may continue to operate for some time.
Cloud mining has always been seen by many as a scam due to the lack of transparency in the process. At worst, cloud mining startups can be Ponzi schemes that do not actually own equipment and merely pay out from profits made from past subscribers.
Although this is not necessarily the case with Hashflare, other problems led to complaints from customers. Hashflare’s high maintenance fees (which reportedly took as much as 87% of earnings in recent months) in combination with a difficult withdrawal process have left many users frustrated and with no trust left in the company.
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