In today's edition of YIYL, (You Invest, You Lose) we take a look at the hosted mining business. Now I've personally never done hosted mining, I thought about it, I did the calculations but it just seemed like a better bet to DCA into bitcoin instead.
But to each their own.
Its funny that bitcoin is a network meant to remove trust, meaning you could mine on your own, with your own ASIC or you could verify transactions on your own with your node, or you could custody your own bitcoin with a seed phrase.
You don't need third parties, yet today most people use third parties.
They leave their funds on an exchange, they trust the data of block explorers nodes and they purchase hash rate or set up mining rigs at facilities. Now I am not saying you can't do what you want, by all means, go ahead, but you're introducing trust into the system and if you're not good at evaluating risk, you should get rekt.
What are Blockware solutions?
Blockware solutions is a mining company that runs its own mining operation but also offers hosting and co-location. So customers can purchase a mining rig send it to one of their locations and get it set up to mine with Blockwares cheaper energy and benefit from their cooling systems and expertise in managing an ASIC.
Now this is all fun and games when NGU, it attracts a lot of people who don't know wtf they're doing and get into mining for the wrong reasons and because money is flowing you don't really vet customers or tell them this might not be for you and we end up with issues down the line when the price reverses.
This comes at a really shitty time for the company as mining companies had been hit hard by the crypto winter and a spike in energy costs. Approximately $2.6 billion is owed cumulatively by just the top 10 Bitcoin mining debtors, according to Hashrate Index and I've already spoken about the insolvency of operations like Core Scientific and Iris Energy.
When margins are getting tighter the last thing you want is to deal with customers suing you and eating into your runway with either payouts or legal fees.
I didn't get what I paid for karen
London-based Faes & Company filed a complaint against crypto mining firm Blockware Solutions LLC on Dec. 17, claiming it misrepresented the performance capability of its miners and lacked adequate power access to keep the machines running.
Now, this is a serious allegation, it means they are falsely marketing their services and not being honest about the performance of their setup.
Plaintiffs in the suit allege losses of $250,000 and are seeking compensatory and punitive damages.
According to the complaint, the parties entered into contracts in October 2021 for Faes to buy $525,000 worth of Bitcoin miners and related hosting services. As part of the agreement, Blockware would host Faes' miners at one of its server facilities, which it allegedly owns and operates for a monthly hosting fee and energy costs.
In the complaint, they claim delays in setup, lack of uptime, and poor management.
Cry harder for both sides
Now I have very little sympathy for either side here, personally, I don't think co-locating with miners is a good business model, it's just centralising operations and creates a KYC bottleneck for sats that should be non-KYC.
If you want to mine, you should take responsibility for your operation and mine yourself, that way when you fail, you have no one to blame but yourself.
It's a good lesson in why you shouldn't trust others when you get into bitcoin, and as we say in mining.
Not your Asic, Not your hash!
Sources:
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