Ever since I started posting on this forum, I’ve frequently seen people, often in a careless manner and rather irresponsibly, claiming that HaoBTC is a Ponzi and will implode in no time.
Originally my thinking is that with time, such sentiment would subside and fizzle away. And in this community, especially in the cloud mining industry, a bit skepticism could be a healthy thing.
But a recent incident led me to think differently.
It started with a blog post in which the author included a Youtube video showing HaoBTC’s Kangding mine. The video was filmed by me and was uploaded to Youtube also by me, but I never contacted the author of the blog post, and was unaware of the post until much later.
Then the post was submitted to Reddit’s /btc sub by someone whom I don’t know either.
The article is general and uncontroversial, using only info public available - the highlight is the video I filmed. What causes the tempest in the teacup is a comment claiming that the mine in the video is not owned by HaoBTC, but someone else.
My first response was one of shock - Who would do that? Seems to me that whoever did it, he or she must hate us, an enemy of sort. However, with all my might, I couldn’t think of one person in the world that should have a good reason to hate us.
Since HaoBTC started to take deposits in November, 2014 - we have paid our users over 2300 BTC in dividends - As of today, that is worth 1.7 million USD. What is more, by paying an interest, our service have been encouraging people to hold. With per Bitcoin price grew four fold in value since we launched the service, every users who chose to trust us is, to various extent, get richer.
What made me angrier this time is that not only this person was accusing us falsely, he did it with invented details. His accusation thus is not general insinuations like most others, but elaborated fabrication. The harm of the later, needless to say, is much graver.
One such detail is a claim that the mine’s owner is man named Li Mu.
Since May 2015, I have spent over 100 days in this place. During the 100 days, I had taken thousands of photos, many hours of video, and overheard numerous phone calls and private conversations - if this mine is not owned by HaoBTC but someone named Li Mu, I would have known a long time ago. Then someone, ignoring all the overwhelming evidence easily accessible online, told the world that HaoBTC and me as a representative, had been lying to the public.
Despite my anger, I calmly considered alternatives to counter this assault.
I offered the person, under the alias 3xploit, a bet of 100BTC.
What I was thinking is that if someone can prove that I was dishonest, then I should never ever seek employment in this space as losing one’s reputation, IMO, equals a social suicide because nobody would ever trust this person and what comes from his mouth.
I thought such a gesture would be enough to bring the slanderer back to his senses - but I was wrong.
He matched my bet.
While I was waiting, I asked a few friends if they know the real ID of 3xploit. A few confirmed that the alias blonged to a man named Marshall Long, CEO of a US-based cloud mining service called Final Hash (I was heretheto unaware of nether ML or Final Hash).
That makes sense.
So he is a competitor, which can be a motivation. What’s more, he appears to be a supporter of Classic, and HaoBTC has chosen to stick with Core.
I then obtained ML's WeChat account where we had a debate that lasted from late night to the next morning.
ML showed me some of his proof - apparently footage filmed of other data centers, possibly in China.
I showed him mine.
The images, videos and posts.
He then told me that he confused the HaoBTC mine with another mine, one not owned by HaoBTC. It was a mistake and we are both right.
I disagree. It is simple logic and only one of us can be right.
I think I am right and he is wrong.
At one point, he reminded me that he was a moderator of the subreddit and have the power to ban me.
Such a childish response comes from the CEO of a top US cloudmining service is beyond belief and begs the question: No wonder cloud-mining has such a bad reputation abroad; unprofessional people like ML may contributed to it.
After reminding him several times I decided that he has no intension to keep his word and pay me 100BTC - an amount that he said is "small".
I badly need some sleep, so I discontinued the exchange.
I subsequently posted all the screenshots of the conversation, including ML's barely-veiled threat, to this forum.
The response is one-sided support for me and condemnation on him.
He lost his moderator the very next day.
Although I never received 100BTC, I feel triumphant.
This is just an anecdote I uses to introduce what I am going to do next, which is why HaoBTC is and can't be a Ponzi:
First let's look at the definition of Ponzi.
According to Wikipedia:
A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
So it is crystal clear that if you want to qualify as a ponzi, you by deninition can’t have a source of revenue enough to pay the investors’ returns.
HaoBTC disqualifies itself by this count alone. I have shown beyond reasonable doubt that the company has a reliable source of revenue - its professionally managed mining operations distributed across the country are making more than needed to meet the obligations to its users.
Currently HaoBTC has borrowed about 30,000 BTC of user funds. Aside from a percentage kept to meet daily withdrawal needs, the rest has been invested in mining facilities, which at the time of writing, generates about 72PH (fluctuate due to a variety of reasons that I would not go into). This amount roughly accounts for 5% of the entire hashrate and entitles us to about 5% of the daily reward of a total of 36,00 BTC, which is about 180BTC (also fluctuates slightly from day to day).
Remember what Charles Dickens, through his fictional character, once said:
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
So we have an income 180BTC, even with all the cost deducted - electricity, labour, development cost and tax, the net profit is well beyond 100BTC (a very conservative estimate).
In comparison, we pay between 4 to 6 BTC daily as dividends.
So there is no way that we can’t afford the amount of dividends at present.
I know I know that mining 180BTC per day today is no guarantee that you will, especially after the halving, mine the same amount. There may be a point that you can't pay the interest.
From a user’s perspective, all you need to care about is two numbers - how much coins we mine everyday - a number we publicise on the front page (A) and how much we pay our investors (B)- something that you can get by doing a simple calculation by noting down total dividend paid in same hour of two consecutive days and subtract the two to get the difference.
The day you begin to see that the number A is smaller than number B, I suggest you withdraw your coins from this service immidiately and send them to your Trezor. But in all likelihood, this will not happen in at least a few years to come.
That is not to say that there are not risks - Bitcoin mining is highly competitive and the situation can change every day.
But there are some facts behind our opportunism:
1. We have already found the cheapest power available worldwide and the most efficient business model that enable us to mine profitably on a large scale. Bitcoin mining is no longer a secret shared by a few. Many corners have been turned to reduce the cost. If there were cheaper ways to do it in a scalable manner, people would have known it. I know some people get free power, but they do it illegally and such practice often involve hidden cost, such as bribery, thus can’t be entirely free. While some may be able to do it small, having a DC level operation would be impossible to hide from public eyes.
2. The new 14 or 16 nm ASIC chips are not so easy to manufacture and mass production and supply will not happen very soon. We learned this by having our own orders from BitFury delayed. Some Chinese manufacturers also encountered production problems leading to low yield rate. So the risk that sudden emergence of new chips rendering ones that we currently deploy useless overnight is unlikely.
3. Even if that happens - unlikely but for the sake of argument, we can easily pivot from a mining company to a hosting company. We have already built multiple DC and have a dedicated team. In the past, we have rejected many business proposals from other miners, including prominent companies such as BTCC and Huobi. If one day we can’t mine profitably, our 25MW data centers will continue to be used for other people who can.
4. Even if such a pivot will not work, then we still have two sources of revenue - our mining pool and exchange. The later has already showed volume steadily growing and we are making a few bitcoins - double digit in the recent rally, in trading commission and withdrawal fee per day.
I hope the above can lead you towards the decision that I believe is the correct one.
