Prohashing suspends service to Nicehash rentals after analysis of block submissions

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Steve Sokolowski
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Joined: Wed Aug 27, 2014 3:27 pm
Location: State College, PA

Prohashing suspends service to Nicehash rentals after analysis of block submissions

Post by Steve Sokolowski » Fri Sep 11, 2020 1:32 pm

Today, Prohashing is announcing that the company is suspending service to Nicehash mining rentals. The changes were effective at 11pm EDT last night.

Since early July, Prohashing has been conducting a wide-ranging audit in an attempt to identify why our accounting system was not matching up with the actual amounts in wallets. For two months, we believed that the cause of the problem was a share recorder bug that was recording incorrect amounts of work performed by miners, or a problem in the mining server where blocks were not being submitted. We did find a number of miner bugs, since we were looking for them. We were able to significantly cut costs by avoiding unnecessary network and exchange fees. Neither of these actions, however, turned out to be responsible for the audit discrepancies.

Earlier this week, after writing the previous post disproving Nicehash's claims that it cannot prevent 51% attacks (viewtopic.php?f=11&t=7353), we decided to review whether Nicehash's refusal to guarantee that sellers submit blocks at a normal rate could be responsible for the auditing issues. We concluded that Nicehash miners, which made up 10% of the pool's hashrate, submitted 3% of the pool's blocks. This result conclusively ended our search for the low-luck bug, and will allow us to increase profitability for direct miners.

The finding should not be interpreted to mean that customers who connect to Prohashing using Nicehash miners are criminals. While there could be miners who rent hashrate and then intentionally fail to submit blocks, we find it unlikely that miners would knowingly do so because that reduces earnings for everyone. Instead, given our experience with testing hashrate rentals ourselves, we believe that many rigs connected to Nicehash are bugged. It's possible there may be some sort of firmware that can speed up mining by only submitting low-difficulty shares. Because Nicehash doesn't police their systems, these miners can earn more money there. It's more likely that our customers renting hashrate from Nicehash are victims, unknowingly being ripped off renting these rigs.

Another factor that convinced us of the necessity to end Nicehash service include past incidents where large amounts of hashrate would be rented during coin forks, often costing a lot of money because exchanges ended up selecting the other chain. Chris actually believes that ethash mining has been a net loss over the years because only three or four incidents involving rented hashrate caused a loss of all profit from direct mining during the rest of the time. Additionally, Nicehash's "negative deltas" generate large numbers of support tickets, and we want to refocus our resources so that we can provide more timely support to direct miners. If you are currently "passing through" miners at a cloud rental service, we'd love to continue our relationship with you as a direct miner.

We will evaluate the impact of the end of Nicehash service in October. At that time, we will decide whether to resume offering Nicehash connections, whether to continue as-is with only Nicehash prohibited, or whether to ban all hashrate rentals from all providers. While there has only been one incident involving a provider other than Nicehash, it may be that the business model for hashrate rental is fatally flawed, because the majority of hashrate rentals could be involved in criminal activity in some way or another. I suspect that the Ethereum Classic thefts are going to soon bring legal scrutiny to not only Nicehash, but to all cloud mining providers, over whether they are taking sufficient steps to stop criminal activity on their services.

While we are almost certain that we have detected all Nicehash miners, it is possible that we could detect additional Nicehash users in the future. Beginning when the new website is released (perhaps on September 15), the entire balance of anyone who is proven to use Nicehash's services is subject to forfeiture upon detection, unless and until this policy may be changed in October. We will post messages to affected customers' accounts notifying them of the policy change, and have already updated the documentation on the new website.

We apologize for not being able to provide advance notice of the change. Once we discovered that the luck correlation was statistically significant, it was no longer justifiable to delay this service suspension, as even allowing Nicehash customers to continue mining overnight would have resulted in several hundred dollars in losses - an amount that we cannot afford in these doldrums between coin price bubbles. We also understand that many customers who had written bots to arbitrage Nicehash prices at pools will be disappointed, and we sincerely apologize to them. Perhaps we will be able to resume offering our services to them in the future, but we can't guarantee that.

Thanks for your understanding, and feel free to reply if you have any questions! You can also submit a support ticket if you have additional questions.
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