Our Bitcoin Mining Adventures

Why we chose to investigate bitcoin mining

Investment returns in the UK remain low despite the recent increase in the Bank Rate to 0.5%. For some time now we have been looking at ways to improve the performance of our investments. One of the many methods that we have looked is Bitcoin and, in particular, Bitcoin Mining.

Bitcoin is a virtual cryptocurrency and payment system that is based on a very complicated computer generated sequence of so-called “hashes” that are added together together to form a “blockchain”. How all this works is beyond the scope of this article but if you want to learn more, try the Wikipedia desription here.Suffice to say that Bitcoin is here to stay and seems to have value.

Getting and Using Bitcoins

In order to use Bitcoins, you have to purchase them, generate them yourself by running mining software or invest in a so-called “mining company”. Running mining software yourself is very computer intensive and it is most likely that the cost of the electrical energy used would exceed the value of Bitcoin generated. If you just purchase them in the hope that the value per Bitcoin unit will increase is very risky. The value of each coin has varied by as much as 50% in the space of a month or less and can go very much down as well as up very quickly. After a very detailed study, we decided to make a very small investment in an existing mining company to try the system out. To use Bitcoin for trade or conversion to normal currency (e.g. $, £ etc.) you need a Bitcoin Wallet. This can be either software based or a real piece of hardware.

The BitCoin Mining project so far

The first step was to obtain a web based bitcoin wallet. For this we chose blockchain.info as it was rated quite highly be several authoratative sites and seemed to us to take security very seriously. Security is VERY important when you are dealing with any financial matter. The sign up process was very simple and setting up the wallet security was detailed and easy to follow. We opted to have a 2 factor sign in using our mobile and sms.

Our next step was to sign up with a “mining company”. We chose sun-mining.com. Our research showed that there are a lot of what can only be described as scam or ponzi mining schemes out on the web. This company looked to us to be fairly legitimate at first but note that we have not given any link to it’s site! Caveat Emptor! Again, the sign up process was quick and easy to follow. Sun-mining offer a range of “contracts” for various cryptocurrencies. We chose to take out a VERY small contract for 3 years mining bitcoin at a total cost of US$18.

This contract promised a return of US$3.70c per month for this investment, i.e. full payback in about 5 months. We transferred the amount requested and “mining” started as soon as the payment was received as promised. After a few days we checked that our promised rewards were accumulating and it looked as if they were.

All too good to be true? Probably yes. When examining the site in detail it became obvious that there were some bad signs and a few pitfalls as follows:

  • It looked as if the minimum transfer amount back to your wallet is .01BTC (bitcoin), i.e. approx. US$71 at the rate on 7/11/17. If this is correct, you would not be able to get any of your minimum contract return back for 19 months.
  • The site offered an affilliate program that looks too generous.
  • The site offered a re-investment plan. If you take advantage of this the accumulation will be quicker but the time until you can withdraw any money increases. This, if repeated, could eventually result in no payback until the end of the contract, if ever!
  • Immediately we started mining, we were offered discounted larger contracts. Why discount if the investment is so great?
  • The company offers no details of their location except what appears to be an accommodation address in Sydney. We are currently checking this out.
  • The company offers no information as to where their staff or equipment is/are located. It is a “secret”, very suspicious. They don’t even say that it is in Australia. it could be in Russia, China or anywhere else as far as we can tell.

Our Conclusions

We make no immediate judgement. All could be well but it does not look good. On our scoring system the likelihood of this being yet another scam is about 8 out of 10. Watch this space for episode 2 soon!