large scale bitcoin mining operations and cloud mining from a regulatory perspective
TRANSCRIPT
Marco StrengCEO Genesis Mining
Large Scale Mining Operations and
Cloudmining from a regulatory perspective
Introduction
State of Digital Money 2015
Cloudmining & Large Scale Mining
• Large scale deployment of miners in either single big facilities or more smaller distributed places
• Installation of hardware in optimized infrastructure
• Using customized software for controlling and hashpower optimization
• In case of cloudmining – distributing hashpower to each single user
Image source: Genesis Mining Europe II Facility 3
Introduction
State of Digital Money 2015
Cloudmining & Large Scale Mining
The regulatory perspective
State of Digital Money 2015
The current situation
• “Mining and mining pools per se will not be regulated“ – Superintendent Benjamin Lawsky, Keynote Speech Money 20/20, 2014
• Still waiting for the final version of the Bitlicence
It is preferable to wait instead of drawing wrong conclusions based on inaccurate assumptions
Ponzi Schemes – a growing threat in the cloudmining market
State of Digital Money 2015
• The cloudmining business structure can be exploited by malicious providers to run a ponzi scheme under the umbrella of mining
• No, or only a fraction of the coins are mined and the money of the clients is taken for payouts of the supposedly mining rewards to users instead
• It is difficult for uneducated users to see the difference until the ponzi scheme is collapsing at some point and is shutting down the operation stealing money from the clients
• Since the malicious providers mostly are anonymous it is nearly impossible to make them liable and soon a new ponzi scheme will be born doing the same again
Ponzi Schemes – a growing threat in the cloudmining market
State of Digital Money 2015
Preventive measures for customers
• Anonymity – Is the service provider anonymous?• Transparency – Does the service provider show pictures of the
mining facilities?• Is the product realistic?• Is the price realistic?
Ponzi Schemes – a growing threat in the cloudmining market
State of Digital Money 2015
Preventive measures for authorities and regulators
• Performing audits for hashpower similar to audits for exchanges proving to cover all funds
• Checking whether the hashpower is really owned by the provider contractually and enough electricity is secured
• Identifying service providers