4 Problems with Cryptocurrency Mining Projects
We looked high and low, far and wide to find a reliable way to invest in a cryptocurrency project that is backed by cryptocurrency mining. We couldn’t find it. We found no shortage of projects proposing to build mining farms with capital raised by Initial Coin Offerings (ICOs) or Security Token Offerings (STOs) but after analyzing each of these projects, we could not convince ourselves to invest due to one reason or another. After following the industry for a while, unfortunately we found our hunches to be completely right.
The 4 biggest problems with cryptocurrency mining projects are:
Whether intentional or not, there are lots of scams in this industry. We watched some scams occur because projects lack governance for violating or defrauding investors. We watched project partners scam their own partners after being fully funded causing them to focus on internal disputes instead of executing their projects. We even watched projects launch token offering after token offering after token offering for the same project, leaving previously created tokens on their deathbeds. With no oversight or regulation, there’s little incentive for projects to be legitimate aside from ethics.
Insufficient Capacity To Deliver
It’s easy to point at a cryptocurrency mining project with a high level of confidence to say whether the project would fail. If you dig deep enough, you’d see that many cryptocurrency mining projects have either fake or largely embellished accomplishments. We’ve seen projects claiming to have shipping containers full of mining hardware, but with some digging, we discovered their shipping containers were empty! Sometimes this required significant digging and wasn’t obvious. Some projects just slapped logos on shipping containers and claimed whatever they wanted to claim about what’s inside of them. Make sure any project you’re looking to invest in has legitimately built at least one prototype of their product so you can have assurance the project can deliver on their claims.
Inadequate Business Model
The cryptocurrency mining space will become more competitive over coming years and projects in this space need to take that into consideration. It’s important to re-invest profits to upgrade hardware, improve efficiency and grow to keep the project not only alive, but profitable. Financial and strategic business models behind a project need to support longevity of the project.
It’s important to balance growth with providing value to the token holders now and in the future. Token holders need incentive to contribute to the token offering, hold tokens, and buy tokens. If sufficient profits aren’t allocated to the tokens, then the tokens aren’t likely to be a favorable investment to investors. We see too many projects apportion profits in ways that don’t make sense to investors.
The cryptocurrency industry is still very young. Token offerings with grandiose claims are getting examined more closely than in the past. Token investors are getting smarter and they’re tired of dealing with all the risks mentioned in this article.
We would love to see the industry full of 100% legitimate projects, but that’s not reality and won’t be for a while. Make sure you trust the project’s founding team and their capability to deliver on the promises claimed. And make sure there is at least 1 government force overseeing the project so if the project doesn’t deliver on their promises, there are consequences.
As a solution to these problems, we created a cryptocurrency mining project that addresses all the concerns outlined in this article. Our project has a fully functioning prototype, the token concept is currently under review by USA’s SEC for governmental oversight, the plans include integrating solar power and patent pending airflow technology to ensure long term competitiveness, and the overall project places heavy focus on providing maximum value for the token holders.