One of the most dominant online cloud-based crypto-mining services, Hashflare, has now abruptly shut down all of their Bitcoin mining contracts. They explained in an official statement that they would terminate the mining service of all active SHA-256 based contracts, after having been “forced to start disabling SHA hardware”.
They explained that they haven’t been able to provide compensation to users purchasing their contracts due to mining profits being lower than the maintenance fee for over a month. The bear market ecosystem and all the instability around it are allegedly why the company has been seeing such low profits. According to the Terms of Service, “if mining remains unprofitable for 21 consecutive days the Service is permanently terminated”.
Hashflare hasn’t yet described their intentions regarding the previously present funds in user accounts before their contracts got cancelled, and this has led to a lot of outrage, with some people calling the entire deal an “exit scam”. This has been fired up all the more considering they have been selling contracts even after 21 consecutive days without profit.
Hashflare made an announcement on 19 July about KYC/AML compliance, stating:
“We are always attentive to existing international standards and regulations and the current update is aimed at ensuring compliance with KYC/AML standards. In order to provide our services we are periodically required to identify users on our platform.”
The difficulty of Bitcoin mining has risen approximately 117% recently since the end of November 2017. The next cycle is expected to raise the difficulty bar by an additional 10.8%.
Cloud-based mining services have seen very little success as compared to traditional hardware-based pools. The nature ASICs raises a lot of concerns in even regular hardware mining pools regarding the huge concentration of hash power. Bitmain assigned mining pools currently own over 51% of hash power, which means they have an equally high possibility of success should they choose to perform maliciously. A likely alternative algorithm to prevent such issues in Proof-of-stake (PoS). However, PoS also holds several concerns like the concentration of wealth and is yet to be properly tested.
Obviously, mining is an absolutely key element of the entire ecosystem surrounding digital currencies, and advancements in the field are necessary. If more attention is given to such sustainable consensus algorithms and more efficient and open-sourced mining hardware, mass mainstream adoption of cryptocurrencies might soon be a reality.