Cloudmining Part 1: A market overview for users

When it comes to engaging in Bitcoin cloudmining, there has been a lot of hype but little entry-level information generated for the average user.

As the concept of mining Bitcoin becomes more and more well-known as a concept, many more consumers are looking into the idea. However, with difficulty at its current level, the expense associated with hardware purchasing, as well as the mining process itself, is off-putting, and so cloudmining is becoming the natural choice for many new parties today.

The infrastructure surrounding mining, especially hardware manufacturers and mining pool operators, has received mixed publicity in recent times. With this in mind, Cointelegraph sought to deliver a review of the major cloudmining providers on the market today, presenting all the relevant information necessary to aid users in their choice.

Nine companies are under review: PB Mining, Eobot, MineOnCloud, CEX.IO, Genesis Mining, BitcoinCloudMining.com, Cloudhashing, Pacific Hashing and Cointerra Mining.

Information gathered by Cointelegraph concentrates on specific areas including legality, security infrastructure and experience, as well as regional usage where given. The last parameter is important to consider, as a provider whose audience is based in a country different to that in which it is registered must consider the legal implications of operations in both countries.

The scores themselves will be used for each area to determine the overall highest placed provider.

PB Mining

Foundation:

Pbmining.com commenced operations in January 2014, and has additionally been selling Bitcoin mining hardware since spring 2013. 

Location and legal info:

Originally based in Saskatchewan, Canada, most operations have now been moved to Iceland. PB Mining further tells us that while registration details were available on the website initially, these were later removed for reasons of heightened security.

Canada recently introduced laws which required Bitcoin entities to register with financial regulator FINTRAC or face being ‘de-banked’. However, operations for PB Mining remain unaffected at present.

A significant source of traffic for the service is generated from the Mexican market.

Security:

PB Mining does not offer two-factor authentication, and it does not permit certain special characters often used to make secure passwords. However, as its mining rewards are automatically sent to an external address, funds are not stored on the site and therefore cannot be stolen.

Mining contracts are fully insured against loss should any of the mining equipment malfunction under any circumstances.

Eobot

Foundation:

Founded in April 2013, Eobot began as a one-click  mining program. Cloud functionality has been added since then, along with a social page with rankings and other information. Long-term, there are plans to add further integrated features such as a full exchange, which Eobot comments it is hoped to achieve soon.

Location, legal info and security:

The company is headquartered in the USA, but does not list a physical address. Regarding security, Eobot comments that “everything is encrypted and secure on the backend” and adds that no hacking threats have occurred since operations began.

Coins mined in the US are required to be submitted as part of a self-assessment tax return and constitute normal income; more information can be found here.

As with PB Mining, a significant source of traffic currently comes from the Mexican market.

MineOnCloud 

Foundation:

The business was initially launched in November 2013. However, power availability did not match demand and so a new location was opened with the necessary facilities on 24 April 2014.

Location and legal info:

MineOnCloud SARL is registered in Toulouse, France. The legal situation regarding mining in many EU states is hazy at best, and France currently has confusing requirements as regards taxation of any profits earned from Bitcoin. See here for more information.

Security:

Specific data is unavailable from the company direct as users select their own mining pool.

CEX.IO 

Foundation:

Development of the project began in January 2013. Assets for Ghash.io were acquired in October and CEX.IO was registered thereafter as a limited company. By November 2013 the two operations had become the most widely-used cloudmining and mining pool respectively.

Location and legal info:

Headquartered and registered in London, UK, CEX.IO operates under the relevant conditions for UK limited companies. However, the largest swathe of its client base stems from the USA market.

The UK is currently a tax-free environment as regards Bitcoin funds, but USA customers are still obliged to submit gains to the US government, regardless of where they were generated; see here for more information.

Security:

All actions relating to CEX.IO accounts require an email or two-factor authentication. In the event of unauthorized access, the company will collect information from the event in question (IP address and timestamp) and forward it to the account holder for further investigation.

In the event that rewards are stolen, CEX.IO commented that “staff will provide assistance to determine the identity and location of the hacker and return the funds to the owner (in case they were not sold or withdrawn by the hacker).”

Group Bitcoin 

Foundation:

Group Bitcoin was founded in 2013 by a group of enthusiasts pooling resources with the aim of secuiring better hardware.

Location and legal info:

The company provides a physical address and other means of direct contact on its website. It is registered in London as a UK limited company.

A significant portion of traffic comes from the Russian Federation.

While the UK currently does impose a tax or VAT on Bitcoin, it is all but outlawed in the Russian Federation – see here for more information.

Security:

No information is available at present.

Genesis Mining 

Foundation:

Genesis Mining began operations this year.

Location and legal info:

Genesis Mining lists an office address in Bermuda, although its support line has a German number and is a German-led outfit. A statement explains that Bermuda was chosen because “it provides a tax environment that is beneficial for a company that focuses [on] cryptocurrencies” and enables Genesis to provide more competitively priced services as a result. Site owners have reported that the major part of their audience (>15%) users from the USA.

Security:

Genesis states that passwords are hashed with an anonymous hashing algorithm. Support for two-factor authentication is provided. User data is secured on a database covered by modern methods of scaling, protecting and back-up “to provide maximum usability” to end users.

BitcoinCloudMining.com 

Foundation:

Originally registered in Miami, the company has been providing Bitcoin cloudmining contracts since mid-2013. It was subsequently bought up by Australian-owned BTC Corporation in 2014.

Location and legal info:

BitcoinCloudMining.com is registered legal entity as BC Cloud Mining Pty Ltd. with headquarters in Melbourne, Australia.

Follow the links for more information regarding the legal status of Bitcoin mining in the USA and Australia.

Security:

No information is available at present.

Cloudhashing 

Foundation:

Cloudhashing was founded in February 2013.

Location and legal info:

The company is located in Austin, Texas. USA traffic accounts for almost half of total usage.

Security:

Cloudhashing implements email authentication and locking of Bitcoin addresses. In its backend, usernames and passwords include 2-factor authentication on all employee accounts. 
Also used is CloudFlare advanced Ddos protection and data centers feature security cameras and even armed security guards with a badge and ID required for entry.

Pacific Hashing 

Foundation:

Pacific Hashing was founded in 2012 in Hong Kong. It currently operates three mining farms, two in Hong Kong and one in China.

Mining in both Hong Kong and China is fundamentally not subject to legal barriers, despite the heavy implied restrictions mooted by the People’s Bank of China.

Location and legal info:

The organization is fully incorporated under the Hong Kong Companies Registry as a private company.

Security:

No information is available at present.

Cointerra Mining 

Foundation:

Cointerra was founded in Austin, Texas in 2013.

Location and legal info:

The company provides a physical address in Austin on its website and openly invites customers to visit the facility. The USA provides the overwhelming majority of its user traffic.

Information regarding the legalities of Bitcoin mining profits can be found here.

Security:

Cointerra commented only that access to software is protected by a username and password.

Summary

The provider coming out on top in many areas is CEX.IO, having been able to provide solid background credentials to complement its current reputation among the community.

The mining field is continually evolving, however, and with maturity comes consolidation, meaning some existing services will become genuine competitors offering all the necessary services in a secure and reliable manner.

Keep following Cointelegraph for updates and further articles on the Bitcoin cloudmining scene!

Check out the other reviews in the series here:Cloudmining Part 2: Sites review.