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In 2018, the decentralized network storage protocol IPFS became popular in the blockchain circle. In the eyes of fans, IPFS is not only the "standard" file storage in the blockchain world, but also has the potential to subvert the traditional HTTP protocol.
The IPFS mining that emerged from this has already entered the field of vision of miners. The "IPFS mining machines" used for mining have begun to blossom everywhere.
However, IPFS is not a blockchain project, and its incentive layer Filecoin, which can be used for mining, has been delayed many times and has not yet been launched on the mainnet. In other words, IPFS mining machines have "no coins to mine" so far.
Miners who are interested in entering the IPFS mining market have found that the current IPFS mining circle is full of various Ponzi schemes and pyramid schemes. "IPFS mining machines" have become a tool for mining machine manufacturers to make money by harvesting leeks.
Why has IPFS become a paradise for "mining machine scams"? Is it the future or a fantasy?
01 Mining Machine Scam
"IPFS mining machines are very popular now, but at least 90% of the 'IPFS mining machine' projects in the country are Ponzi schemes under the guise of IPFS." Ye Shengrong, the person in charge of an IPFS mine, has long been accustomed to the chaos in this industry.
IPFS, also known as Interstellar File System in Chinese, is a decentralized network underlying protocol. Similar to Bitcoin, IPFS miners can freely join the network, contribute storage space to the IPFS network, and obtain various resources in the network.
On the IPFS protocol, people have established a reward mechanism called "Filecoin". Filecoin issued the token FIL to encourage miners to store files.
"But the Filecoin mainnet has not yet been launched, and the current IPFS mining machines cannot mine FIL." Ye Shengrong said, "This also provides many Ponzi scheme project parties with an opportunity to take advantage of it."
“These project owners use ‘one machine dual mining’ and ‘one machine triple mining’ as selling points, claiming that their mining machines can mine FIL and other currencies.” Ye Shengrong explained, “But ‘other currencies’ are ‘air coins’ issued by the project owners themselves.”
According to him, there are currently two main profit models for Ponzi schemes under the banner of IPFS mining machines: one is to sell mining machines at a high premium and make money from the mining machines; the other is the "MLM coin" model, cooperating with the exchange to pull up the market, and then dumping the market to cash out.
"Most project parties will take a two-pronged approach," said Ye Shengrong.
In February 2019, the IPFS mining machine scam created by the "Zhongyuan Silicon Valley Innovation Technology Industrial Park" (Henan Lianxin Technology Co., Ltd.) was exposed by the media.
According to China Business News, Zhengzhou police investigation found that in just five months, the company sold more than 300,000 "Snail Star Servers" to thousands of people, with the total amount involved reaching 2 billion yuan.
"The Snail Interstellar Miner actually does not need the function of 'mining coins' at all. The project party can distribute the tokens 'CAI' they issue directly to the miners." Ye Shengrong said.
In April 2019, the IPFS MLM mining machine scam of "Huaye Blockchain " was exposed by the media.
Under the guise of "mining machine direct sales", the company used online brainwashing to deceive middle-aged and elderly people into recruiting people and developing downlines. Many people were defrauded of hundreds of thousands of yuan.
Many IPFS scams are not clever in themselves. However, under the temptation of wealth, many investors still hypnotize themselves or "knowingly commit crimes".
"Before the Filecoin mainnet goes online, I plan to keep mining Sinoc coins. Sinoc, like IPFS, uses hard disk mining, and the current returns are very high." IPFS miner Liu Xing told the media.
Sinoc’s official website shows that the project is a "public blockchain system for cloud storage and the gaming industry " that uses an underlying protocol called "PoC" (Proof of Capacity) - that is, the larger the hard disk capacity, the more coins that can be mined.
Sinoc tokens are issued through the sale of "computing power contracts". Membership fees are charged to novices in the name of mining machines, and high returns, high profits, and high rebates are promised to encourage users to develop downlines.
This is a typical pyramid scheme coin model, and the operation model and team members of this project are highly similar to those of the pyramid scheme coin "MCC". However, Liu Xing does not mind this.
But he still revealed to the media that the coin production of Sinoc cloud mining machines has dropped significantly recently - one mining machine can only produce 0.8-0.9 coins per day.
Liu Xing said that Sinoc had announced that it would compensate the miners, but the final result may not satisfy the miners.
"I invested 150,000 yuan in a Sinoc cloud mining machine. It was shut down for maintenance for three months, but the compensation I received was less than 30 coins. According to the current coin price, it is less than 300 yuan." Miner Chen Chuan told the media.
"I think Sinoc is a scam." He said that he asked questions in the Sinoc group several times and was directly kicked out of the group by the administrator.
02 Tenfold Profit
In the eyes of many miners, the popularity of IPFS mining began after December 2018.
"The popularity of IPFS is most likely related to the decline in popularity of other main chain projects." Guan Zheng, a senior practitioner in the IPFS industry, told the media, "Main chains such as Ethereum and EOS focus on games, gambling and exchanges, and are currently progressing slowly. Therefore, some investors have turned their attention to IPFS."
In Ye Shengrong's opinion, IPFS is well-known and has a good reputation in the blockchain circle, so it is easy to be targeted by Ponzi schemes and fraudulent projects. "Even if the project party is investigated, they can defend it by saying that 'mining machines can mine IPFS (FIL)'."
"In December last year, IPFS mining machines became very popular in Hong Kong, and Huang Zhengjie, the 'coin master' who was involved in this industry, also attracted a lot of investment." Guan Zheng said.
In December 2018, "Coin Master" threw money in the downtown area of Hong Kong
"Coin Master" became famous for throwing money around in Hong Kong last year. According to Hong Kong media reports, in just one offline salon, "Coin Master" sold mining machines worth more than 20 million Hong Kong dollars. However, some miners reported that even if the Filecoin mainnet is launched, "Coin Master"'s mining machines cannot mine FIL. "Another reason for the proliferation of IPFS mining machines is that the hardware threshold is extremely low." IPFS miner Chen Chuan told the media, "This type of mining machine is essentially the same as a server. You can find a factory in Shenzhen to assemble it and sell it under the banner of 'XX mining machine'."
"As of now, Filecoin has not officially announced the specific mining algorithm." Guan Zheng said, "Therefore, mining machine manufacturers do not know how to customize and transform mining machines that are more suitable for IPFS mining."
He revealed that to this day, the two mainstream types of IPFS mining machines on the market still use two hardware models left over from the server era - "NAS" and "blade" servers.
NAS stands for Network Attached Storage. "In the civilian market, the main target users of NAS are film and television enthusiasts," said Liu Xing. "Most of them use NAS to store film and television resources. Therefore, most NAS mining machines are small, with only 4 or 6 disk slots."
A common NAS-style IPFS mining machine
Guan Zheng revealed that before April last year, most of the IPFS mining machines on the market were transformed from NAS. Many mining machine manufacturers cooperated with NAS foundries to simply transform NAS and package it into IPFS mining machines.
After entering the second half of 2018, blade servers began to become popular in the mining circle.
A common blade IPFS mining machine
"In the server market, blade servers are aimed at commercial users and have far better performance than NAS servers," said Liu Xing. "But in fact, many mining machine manufacturers just use blade servers as a gimmick because they look more professional."
"Whether it is NAS or blade server, the selling price of mining machine manufacturers is often more than five times the cost," said Guan Zheng.
Chen Chuan discovered that the ratio of the selling price to the cost price of such servers was as high as 10 times, which was a huge profit.
In Chen Chuan's opinion, the reason why mining machine manufacturers dare to charge exorbitant prices is that they have seen that many IPFS miners do not understand the real hardware cost of mining machines. "Many novices enter without understanding the mechanism of IPFS and are easily ripped off," he said.
03 Other Scams
Currently, many mining machine manufacturers are beginning to look for new profit points besides mining machines. The one they are eyeing is hard disks.
IPFS mining machines are based on hard disk mining, and hard disks are their most important accessories. Many mining machine manufacturers will package mining machines and hard disks and sell them to miners.
But many miners don’t know that the hard drives they buy from mining machine manufacturers may not be brand new, but second-hand.
There is a huge price difference between the two. "A new 6T hard drive costs about 1,300 yuan, but a used one costs only 600 yuan. The price of a used hard drive in a computer room that is close to being scrapped is even lower," said Guan Zheng.
"Recently, second-hand 6T hard drives in Guangdong and other places have been snapped up," he revealed. "This is most likely done by the mining machine manufacturers."
"Some assembled mining machines may also use second-hand motherboards and CPUs discarded by Internet cafes," Chen Chuan told the media.
In addition to scams, there are also many "mine pits" in the IPFS mining market, and "mining farm nodes" are one of them.
The so-called "mining farm nodes" are similar to the "cloud computing power" in Bitcoin mining - mining machine manufacturers can package mining machine hardware and network bandwidth into "nodes" and sell them to miners.
For example, a mining farm node provider launched a node product that integrates 4T hard disk storage and 20M bandwidth, and sold it in packages to miners at an annual price of around 20,000 yuan.
The quotation scheme displayed by a mining farm node
But in Guan Zheng's view, this node model is not friendly to investors. "First, it is difficult for them to check whether the mining machine manufacturers have purchased enough hardware. Second, even if the hardware really exists, it is difficult to say whether investors can still make a profit after paying the node fees."
Although the IPFS mining machine market is full of chaos, in the view of many practitioners and miners, there are still ways to identify whether a mining machine is reliable.
"The hardware cost of IPFS mining machines is relatively transparent. If the hardware cost of a mining machine is 50%-70% of the total price, the price of this mining machine is relatively reasonable." Guan Zheng said.
"However, in the IPFS circle, companies that truly engage in technology rarely get involved in mining machines. It is still too early to make mining machines now," he said.
After IPFS became popular, various types of mining machines emerged one after another, and it was difficult to distinguish the authenticity.
Many of these mining machine projects have become a "pass the parcel" Ponzi scheme. However, some investors know the nature of the project and are still enthusiastic about it. What attracts them is nothing more than the word "profit".
The number of players does not decrease, and the scams continue. This is an unsolvable cycle. (A Blockchain Book ) |
