As cryptocurrency has flourished, online attackers have developed more sophisticated methods to trick investors and traders into revealing their personal information. This is certainly the case in the cloud mining market. How do crypto cloud mining scams work and how can you avoid them?
What is crypto cloud mining?
Some of you may be wondering what cloud mining even is. Is it the same as regular crypto mining? Well, not exactly. A typical cryptocurrency miner needs specific hardware to mine coins or tokens. This can be something as simple as a CPU or a specialized unit like an ASIC miner. Either way, hardware is required to solve math equations, mine coins, and verify blocks of transactions.
But not everyone can afford to invest in the hardware required for mining. Nowadays you usually need a single GPU, a GPU rig or an ASIC miner to mine successfully, which can cost a lot of money. This is where cloud mining comes in. For those who don’t want the high upfront cost of mining, or for those with limited technical knowledge, cloud mining can be a cheaper and less complicated alternative. But how does it work?
Crypto mining websites are run by people who have access to mining hardware. These are typically farms that can host massive amounts of hashing power to increase the chances of success. A client pays these cloud mining websites a fee for mining, which means they can still earn mining rewards without having to run a full node themselves.
But this type of model can be very easily exploited by scammers who try to trick users into handing over funds without offering the benefits of a legitimate cloud mining service. So how are crypto cloud mining scams done?
What is a cloud mining scam?
Paying a fee for Netflix, ExpressVPN, or many other types of online services gives you instant access to what you pay for. However, with cloud mining websites, you pay a fee to get a reward later. Essentially, you rely on this service to make a profit.
This is why cloud mining sites are often scams. In fact, the vast majority of cloud mining services out there are run by cyber criminals, making the whole endeavor incredibly risky. Cloud mining scams now come in the form of mobile apps as scammers look for more ways to reach unsuspecting victims.
When you sign up for a cloud mining site, you usually have a variety of plans to choose from, all of which vary in pricing and profitability. You can usually also choose from a range of mining coin options like Bitcoin or Ethereum, as well as different minimum hash rates. Then you have to pay for the mining contract of your choice. This payment is the target of scammers.
Mining contracts can be massive in price, from around tens of dollars to a few thousand dollars. So scammers can make a lot of profit here.
Once the scammer has convinced you enough and you have made your mining contract payment, it is already too late. It may even take days or weeks before you realize you have been scammed as mining rewards can take a while to arrive. Furthermore, if you enter your payment details on a fake cloud mining website, you run the risk of them being stolen and used. This introduces a whole new element of danger as funds may be withdrawn from your bank account without your permission.
Some cloud mining websites may also be after your wallet’s private key. Private keys can be used to access crypto wallets and therefore your funds. When a user is unaware that a private key is required always kept secret, they might not think about handing it over to a cloud mining site if it says the key is needed so they can get money.
There is obviously a lot of damage that can be done by illegitimate cloud mining websites, but there are ways you can spot a fake website and keep your data and funds safe.
How to avoid cloud mining scams
Spotting a suspicious cloud mining site can sometimes be easy. After all, not all scammers are sophisticated, so some illegitimate cloud mining sites are riddled with grammatical and spelling mistakes. These errors can often be an indicator of a fraudulent website, so keep an eye out for lazy writing.
Additionally, some fake cloud mining sites offer incredibly high returns to trick potential customers into handing over their funds. Although cloud mining can be profitable, be aware that you are sharing your rewards with other customers, so you are not likely to make large amounts of money with this company on a regular basis. Additionally, if the site offers instant rewards after you sign up, consider that a red flag.
Mining is a long-term game, so the promise of an instant win is usually unfounded.
You should also do some research on your prospective cloud mining service to see if it has a mining farm. Secure cloud mining sites often provide information about their mining farm to prove their legitimacy. However, scam sites sometimes omit such information or even invent a farm address. Alternatively, the site could use the address of an existing farm. So if an address is given, do a little research to see which company runs the farm, or if the farm even exists.
You can also check the age of a particular provider’s website domain to see if they’ve been around as long as they claim. Many scam websites state that they have been operating for a number of years to increase their legitimacy in the eyes of victims. So try using a domain age verification website like Dupli Checker or Small SEO Tools to verify that a company is as old as it claims.
Cloud mining scams are everywhere, but they can be detected
Unfortunately, the cloud mining industry is full of cybercriminals, so it can be difficult to protect yourself from scams if you want to try cloud mining. However, stay alert and use the tips above to weed out fake websites and protect yourself from malicious parties trying to get their hands on your funds and data.