A secret of mining: People won't take their money

Every day, it seems that there is another security breach at an exchange or wallet service. Some estimates suggest that criminals have stolen over a billion dollars from exchanges, so it's easy to think that people will take whatever money they can. Thus, you might be surprised to learn that I've recently been working to solve the opposite problem: getting rid of money that we owe.

Here's a secret about mining pools: one would be surprised how many people don't care about claiming their free money. I recently sent 1400 litecoins from our hot wallets to a paper wallet (https://prohashing.com/explorer/Litecoi ... EpKLZ8eNQX) because the amount of money being stored online was starting to get dangerously high. Those litecoins only represent a fraction of the unclaimed money. Even though the money is now safe from hackers, I decided to perform an analysis to figure out if we can reduce the issue and was amazed by the scale of the problem.

There appear to be two major causes for this unclaimed money: missing payout addresses and invalid 1099-MISC/W8-BEN data. There is a third category of "forced payouts," where the customer did not want to take payment but where we were able to pay him or her anyway.


Missing payout addresses

Missing payout addresses account for $51,678.20 of the total balances that are currently unclaimed. Of the customers in this category;

• There are 12,178 total customers who are owed a non-dust balance in at least one coin and who have not entered a payout address. Dust is defined as a balance lower than the transaction fee the pool paid for yesterday's payout in the coin, divided by the number of users paid in that coin.
• There are 1,158 customers who are owed at least $1 who have not entered a payout address.
• There are 71 customers who are owed at least $100 who have not entered a payout address.
• There are 6 customers who are owed at least $1000 who have not entered a payout address.
• One customer is owed $8,973 and has not entered a payout address.

The research revealed that many customers who have accumulated large balances signed up between 2 and 4 weeks ago, indicating that there are some people violating our terms of service purposely trying to use the site as a bank. These customers appear unwilling, or unable, to generate a wallet of their own and apparently trust us to safeguard their money for them, despite the large warnings indicating that our zero-liability policy in the event of hacking is in effect for all accounts that do not have payout addresses entered.


Invalid 1099-MISC and W8-BEN data

The second major cause of unpaid money is missing or invalid 1099-MISC or W8-BEN data. Because we issue payouts to customers in return for their hashrate, Federal law mandates that we collect this data. Fortunately, since we aren't a money transmitting business, the data we need to collect is minimal compared to that usually required by exchanges. For 1099-MISC forms, there are only seven fields, and for W8-BEN data, we are only required to store it offline, not actually file it with anyone. In fact, a major issue we face is people who send us unwanted identity documents, like driver's licenses and passports. We aren't required to collect these and need to expend resources to search for and delete them so that they are not copied if a security breach were to ever happen.

Note that customers are only required by law to provide the information if the next payout will cause them to exceed $600 in payouts for 2018, so all of the customers listed have been paid $600 and now have additional unpaid balances.

• 2,544 customers who have non-dust balances still decline to provide this basic information.
• 1,726 customers who have balances greater than $1 in at least one coin failed to enter their information.
• 295 customers who have balances greater than $100 have failed to enter this information.
• 27 customers who have balances greater than $1,000 have failed to enter the information.
• One customer can claim $9,100 if (s)he enters the information.

The total amount of money that is waiting to be paid to customers who have not completed these forms is $224,046!


Forced payouts

The final category of customers who weren't interested in being paid was "forced payouts." These are customers who disappeared from the site without requesting payout, or who stopped mining a coin and did not request payout after 90 days.

• There were 13,370 forced payouts. All forced payouts are non-dust, because they would not be paid otherwise.
• 4,486 force payouts of greater than $1 were issued.
• 60 force payouts of greater than $100 were issued.
• One customer had a balance of $1,068 before the payout was forced.

The total amount paid through forced payouts this year has been $53,992.87.



Since the first two categories overlap, the total amount of money owed to customers who refuse payouts is over $261,000. Over the past few days, we moved 13 bitcoins, 1400 litecoins, 9 bitcoin cash, and a number of other coins to paper wallets because history suggests that much of this money will probably never be claimed. If we include forced payouts in the totals, the total amount that customers are or were not interested in being paid exceeds $315,000.

All of the statistics discussed cover the period from January to October. With total revenue of $54,630,722.48 during that period, about 0.57% of everything was earned during that period cannot be paid or was paid against the customer's wishes because of paperwork issues, because (s)he never entered an address where we can pay him or her, or because (s)he simply didn't care enough to change his or her payout threshold to zero.

As you can see, regardless of how difficult it may seem for you or me to understand why customers would ignore so much value, a large amount of money from mining is never claimed. If a mining pool adopted different reimbursement policies than ours, I suspect that a significant revenue stream could result from this unwanted money. In a future post, I'll discuss some other statistics that enable less transparent pools to pocket additional revenue than seems apparent from their websites.