How to vet a mining operator.
Twelve questions to put to anyone asking for your capital, in writing, before you sign. Use them on me. I have marked the two where my own answer is weaker than I would like.
4 min readThere is no licensing body for this.
No regulator, no standard contract, no accreditation worth the name. The variance between operators is enormous and the diligence is yours to do.
Send these in writing. How completely someone answers tells you as much as what they answer, and an operator who will not put a fee schedule in writing before you sign has already told you what the relationship looks like afterwards.
Money and ownership.
Is the fee the only recurring charge
Ask for the complete schedule in writing: setup, provisioning, monthly minimums, administrative charges. Vague references to standard industry fees are a red flag on their own.
Do I own identifiable machines
Ask for serial numbers and a bill of sale. Anyone selling a share of pooled production rather than specific hardware has removed the depreciable asset, which is the thing the tax argument rests on.
Who do I contract with
Ask whether you sign with the facility and the vendor directly, or whether the operator sits in the middle holding the paper. If they are in the middle, ask what happens to your machines if they fail.
Does anyone else touch my Bitcoin
Ask whether output goes to a wallet you control, or through an account the operator holds. Anyone taking custody of your funds or your coin has introduced a risk that has nothing to do with mining.
How does the operator get paid
A percentage of production means they earn when you earn. A flat monthly fee is collected whether the machines run or not. That difference tells you where their attention goes when something breaks.
The hosting questions, asked correctly.
This is where most checklists, including the earlier version of this one, get it wrong. They tell you to demand power passed through at cost and to treat a bundled rate as evasion. That advice sounds rigorous and it is misdirected.
Hosting is a bundled service. The dollars per kilowatt hour figure is a billing convention applied to your machines’ draw, and it covers rack space, power, cooling, network, security and the facility’s margin. There is no underlying meter reading to audit it against, and an operator claiming to hand you electricity at cost is either mistaken or describing something else. Comparing two facilities on that number alone compares two bundles.
What is actually in the bundle
Ask what the fee covers and what is charged separately. That is the comparable, not the headline rate.
Can the rate move mid term
Most facility agreements let the facility raise the rate if delivery costs rise, usually on around thirty days’ notice. Ask what triggers it.
What is my election window
The protection is normally a no fee termination right with a short window, often around fifteen days. Miss it and the new rate is deemed accepted. Ask who is responsible for telling you the clock has started.
What security interest is taken
Facilities commonly take a continuing security interest over the equipment and its proceeds, including mined coin, against the hosting bill, and may file without your signature. Ask to see the clause.
Operations, and the two where I score badly.
What is the downtime remedy
Ask what happens when a machine is offline, how quickly it is noticed, and whether anything compensates you. Be wary of an uptime percentage presented as a promise. A remedy for downtime is a real thing. A production floor is a projection wearing a contract’s clothes.
Who physically has access
Ask about facility security, whether you may inspect your hardware, and who can touch the machines.
What does a report contain
Ask for a sample. Per machine production, per reward dates and values, uptime, hosting cost by site. Summary level reporting is not enough for your accountant.
Client references
This is the first one I fail. I cannot give you a list of clients to ring, because I have not deployed for one yet. What I can show you is my own deployment and the documents it produces. If a track record with other people’s capital is your requirement, I am not your operator and you should say so now.
How many people are behind this
This is the second. MinerOps is one person plus facility and vendor relationships. There is no overnight shift. On a large deployment that concentration is a real risk and you should price it in. Everything material is in your name, so if I stopped you would keep the hardware, the contracts, the pool account and the wallet.
How to read the answers.
Look for consistency between what someone tells you on a call and what the contract says. A contract that is silent on hardware ownership, exit terms or liability was written to protect the operator, and the silence is the answer.
Weigh incentive alignment heavily, and weigh candour about weaknesses more heavily still. Any operator can present a clean sheet by leaving things off it. The two answers above are the ones I would least like you to dwell on, which is precisely why they are on this page rather than absent from it.
Put these to me.
Bring the list to a call and I will answer every point, including the two above, and show you the contract language behind the answers. If a different operator answers them better, that is a good outcome for you. You can also read what can go wrong and who I am.
Book a discovery call No cost. No obligation. No follow-up sequence.