One thing I missed in criteria in the OP (it might have been said already, didn't have the time yet to read the rest) is plausiblity check on the promised (and delivered) returns.
Ive deliberately ignored profitability for a few reasons already explained, but also because it doesnt really tell you much about if a service is a scam or not. A ponzi can arbitrarily set perceived profitability. Setting it for low profitability will make for a slow, longer lasting ponzi, setting it high will make it collapse faster, but its not even obvious to me which will earn the scammer most. So I dont want high prices to become a false indicator of legitimacy, nor penalize a legitimate service for having highly competitive price, nor give ammo to those that accuse legitimate mining services of being scams just because the contracts are no longer able to pay dividends.
That said, nice job on the website. I generally ignore all cloudmining "review" sites because they are simply a vehicle to push referrals. Its nice to see one that actually tries to tell the truth.
Well, it is one the
main characteristics of Ponzi to offer high returns with little to no risk. The SEC lists the following items with regard to returns:
- High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any "guaranteed" investment opportunity.
- Overly consistent returns. Investment values tend to go up and down over time, especially those offering potentially high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.
And if you think about a Cloud Mining contract, then your only real risk is credit risk. Hence getting over 100%+ per annum makes zero sense. That´s because it is similar to a swap contract, which has zero NPV at inception, but with the credit risk being off balance due to the upfront payments. In other words, your primary source of income depends on the likeliness of default of the company involved.
But most genuine cloud mining companies cannot offer the required discount. That´s because they have the operational costs which are not relevant to the fair value of the contract. If you do include that, then the customer always has a superior investment strategy buying directly from an exchange and would never buy the contract. In other words, they would really need to stress their own position to offer any discount at all. Thus if it is genuine then you´ll typically pay too much.
From what I´ve seen so far, there is nothing in between a poor product and an unrealistic (Ponzi) product. I suppose that because most companies do not know how to accurately value their own product in the first place. I've contacted several of them, but not a single one includes expectations in the pricing of the product. You can fix the price, but not the hashrate, so how can you properly value your swap-like product if you do not have an opinion on expected future cash flows?? Fortunately for them, their customers cannot do this assessment either. But this is also what causes the huge gaps between a "normal" and a "ponzi" product. A genuine business intuitively sets the discount too low, while a ponzi schemer does not care and offers an arbitrarily large one.
Nevertheless, it is still only an indicator as scammers might choose to simply offer a competitive rate (meaning: still a rather poor product) in a market that is not properly understood. So overall, I can agree to leaving it out to a certain extend, although I do think that it is a pretty strong indicator in the current environment (perhaps just more difficult to understand).
Having written all this, I would like to end with a compliment for how this assessment has been set up. In the end, it's not like the final verdict for the concerned cloud mining companies is miles apart. So at the very least, the criteria already used seem quite good.
