Bitcoin and Cryptocurrency Mining Scams
The cryptocurrency market has been a place where scammers and fraudsters became very active trying to steal users’ funds. Cryptocurrency mining scams expanded in the last years and it affected users from all over the world. In this guide, we will explain what Cryptocurrency mining scams are and how you can avoid them.
What is Cryptocurrency Mining?
Cryptocurrency mining activities are a very important part of the crypto market. They allow new coins in different Proof-of-Work (PoW) networks such as Bitcoin, to be created.
In order to do so, you can rent mining hardware from companies (which is called cloud mining) or you can simply mine virtual currencies with the mining hardware you acquire. Due to the large cost of installing a Bitcoin mining rig, users prefer o use cloud mining services.
What are Bitcoin and Cryptocurrency Mining Scams?
Cryptocurrency mining scams make reference to schemes that push users to invest in crypto mining companies or hardware with the promise of making large amounts of money. Some firms could provide users with the promise of earning large sums of BTC or other PoW networks by purchasing unique and powerful mining rigs.
However, these are simply scams that are trying to steal users funds. One of the ways these cryptocurrency mining scams work is by having “hidden fees” when you mine digital assets. These projects will claim that these fees were previously disclosed and you would not be able to do anything against them. Your mining hardware (cloud or physical) would not pay off the investment you made.
Another way in which they can scam users is by simply lying about their services. While expert crypto users might be able to identify cryptocurrency mining scams, newcomers may find it difficult to understand which are genuine services. Thus, they end up buying cloud mining subscriptions or mining hardware that simply do not work.
This is why it is always important to know that only the largest cryptocurrencies in the market will allow you to generate gains through crypto mining. Instead, if you want to mine cryptocurrencies, the best thing to do is to search for the most popular and recognized services providers rather than small and recently created firms.
Mining Max Scam
One of the largest mining scams in the crypto market was the South Korean MiningMax. This platform promised users to get large ROIs through an innovative cryptocurrency mining project. Users that brought new clients to the platform were rewarded with higher ROI.
You can check our guide related to Ponzi Schemes clicking here.
However, this firm was just stealing users funds and enriching the first investors. More than $250 million in funds were gathered by this firm. Most of the users were located in South Korea, the United States, China and Japan.
Cryptocurrency Mining Scams Red Flags
These are some of the things you should take into consideration to recognize a cryptocurrency mining scam:
- They offer large (and sometimes unbelievably large) ROI
- Crypto mining scams promise users to mine a wide range of virtual currencies
- Individuals are requested to recruit new members to increase their ROI
- Withdrawals do not work properly
- There are delays with the physical delivery of mining hardware
- Cloud mining services would have very high hidden fees
- They may claim you didn’t surpass the minimum mining threshold to withdraw funds
All the things that could look suspicious should make you consider whether this is a scam or not. You should always make your own due diligence and understand where you are investing your funds.
At The Crypto University, we do not recommend Cloud Mining at all. You should take care of your funds and avoid being involved in scams.