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Crypto Academy

A little crash course on cryptocurrencies

Chapter 1 - Krypto

For some, Crypto means the future of our financial system, for others it is intangible or even poses a threat. As an investor at the latest you should understand Crypto Currencies, because their influence on the financial market will continue to increase in the coming years.

Basically, Cryptocurrencies are a form of digital cash that enable people or companies to transfer value in a digital environment.

Currencies such as the Euro or US dollar are also called fiat currencies. The latter are mostly based on physical trading, the assets are backed by institutions and, in the case of purely digital transfers, they are monitored centrally. Cryptocurrencies, on the other hand, are a new form of value exchange and are not issued by a Central Bank. They are based on decentralized Blockchain Technology.

"Every informed person should know about Bitcoin, because it could be one of the most important developments in human history." (Lean Louw, two-times Nobel Prize nominee)

The beginnings of Blockchain Technology date back to the 1970s. The basic idea of various experiments in Cryptography was to create a decentralized database that would enable tamper-proof digital entries through Cryptographic encryption. The Blockchain generates forgery-proof originals from digital data (e.g. account balances).

Banks would no longer be needed, at least not for money transactions. While a bank stores data on central servers that can be manipulated, which at most have a few backups on other servers, a copy of cryptocurrencies is stored on so many nodes that they are always available. Values can be transferred almost without authorization without the intervention of third parties. Anyone with an internet connection can transfer money. This decentralization ensures that payment flows are completely automated. Money transactions are becoming cheaper, faster and more secure.

A blockchain is therefore a very special type of database in which data can only be added, but not removed or changed. Data is added as blocks. The blocks are linked into a chain (blockchain) and each block contains a unique fingerprint (hash) of the previous block. Changing individual blocks would mean changing all subsequent blocks as well, which seems almost impossible since countless copies of the blockchain exist on nodes and are rejected during checks. On the other hand, if the node receives a valid block, it broadcasts this information to the entire network.

“Bitcoin is a remarkable cryptographic achievement and the ability to create something in the digital world that you cannot can duplicate has tremendous value.” (Eric Schmidt, former CEO Google)

There were already attempts with digital cash programs in the course of the 1990s, but it was not until 2009 that the first cryptocurrency was to be published: Bitcoin. To date, the true identity of the creator, who goes by the pseudonym Satoshi Nakamoto, remains unknown.

Bitcoin triggered a real hype and spawned a large number of subsequent cryptocurrencies, at times more than 20,000 different ones, of which 90% without added value. Behind some successful cryptocurrencies are complex, state-of-the-art companies and technologies, mostly supported by well-known experts in the respective industries, all with the aim of creating real added value for the digital world.

At first glance, Tokens and Cryptocurrencies appear identical, as both are traded on exchanges and can be sent back and forth between Blockchain addresses. While Cryptocurrencies serve as money, a medium of exchange or a coin, in which each unit is worth the same, in a Token a large number of decentralized applications can be implemented and they are therefore more flexible. Millions of identical Tokens can be minted, which, like Cryptocurrencies, also serve as currency, but individual ones can also be equipped with unique properties. They are conceivable as a receipt, shares in companies or loyalty points.

A distinction is made between Cold-Wallets, a specially developed hardware from e.g. Ledger similar to a USB stick or an application on your PC / smartphone. Wallets basically contain a Private Key and the Public Key to your digital assets.

Whereas with a Crypto-Wallet the Cryptocurrencies can be stored You can send or receive money and record transactions.

Chapter 2 - Krypto Mining

Satoshi Nakamoto, the creator of the Bitcoin, once proposed the so-called Proof-of-Work system, which would allow anyone to propose a block to attach to the Blockchain. To submit this new block, users must sacrifice computational power to solve complex algorithms in order to eventually be rewarded. It is a proven system to achieve consensus among users. In addition to Bitcoin, well-known Cryptocurrencies such as Ethereum Classic, Litecoin, Dash and Kadena rely on Proof-of-Work.

On the other hand, there is the Proof-of-Stake system, which Ethereum has joined since mid-September 2022. Etherium can no longer be created by miners since then. Value is built through the staking principle. You get rewards by holding values over a usually predefined period of time.

The proof-of-work process is called Mining. If the miner finds a solution to a cryptographic puzzle (algorithm), the block he or she has built will extend the chain (Blockchain). As a result, you receive a reward for your miner, the so-called Block Reward.

Well, it's not quite that simple. You don't create a block on your own and you join the so-called mining pool. Thousands of miners combine their computing power and share the Block Rewards.

Before we talk about Mining Hardware, it should be made clear from this point that it takes a lot less electricity to generate a Bitcoin through mining than the same value in e.g. Euros in the banking system. When selecting the mining method and the hardware, however, the location with its local energy prices plays the most important role when it comes to assessing whether a Miner is digging profitably or not.

We will help you to purchase suitable , powerful and at the same time efficient miners. So-called ASIC miners (Application Specific Integrated Circuit) are primarily used for this purpose, which are designed precisely for such mining operations. At the same time, we know specialized data processing centers, so-called Mining Farms or Mining Hotels, to operate your mining hardware in an optimal environment with low energy costs.

In a Mining Pool, a large number of Miners are brought together to form a common network. The aim is to use this method to generate the necessary hash rate, i.e. a bundled power of computing power, in order to generate Block Rewards together.

These profits are then automated and distributed in the Mining Pool to the Mining participants according to their used hash power. The bundling of computing power gives smaller Miners the chance to get a piece of the pie. There are currently around a dozen relevant pools for currencies such as Bitcoin, Ethereum Classic, Litecoin and Kadena.

We recommend the F2Pool for Bitcoin, Etherium Classic and Kadena and for Litecoin NiceHash. We support our customers in setting up these Mining Pools.

The Hash Rate is a common metric in the field of Cryptocurrencies, in which data of all kinds can be uniquely encoded and transferred using so-called hashes (a combination of numbers and digits). This is done on the basis of an algorithm such as Bitcoin's SHA-256 Algorithm. The Hash Rate (hash power) provides information about the computing power of miners and is given in hash per second (H/s). The greater the computing power of the Crypto Miner, the more calculations can be performed per second to create a hash that is identical to the specific "Nonce" (number used once) of a block. The block is then considered validated.

The Mining Difficulty is a variable value that describes the effort that has to be made available within a network to create an additional block and send it to the Blockchain to attach The higher the level of difficulties, the more computing power has to be used for a block reward. It must also be continuously adjusted so that the creation and validation of a block remains constant in terms of time and that no falsifications can occur in the network.

Das Akronym ASIC steht für Application Specific Integrated Circuit.

ASIC Miner sind Hochleistunscomputer welche nur für den Zweck des Krypto-Minings konzipiert wurden, keinesfalls zu vergleichen mit gewöhnlichen Heimcomputern oder Servern. Ein ASIC-Miner besteht zumeist aus mehreren Hashboards, auf denen die ASIC-Chips angebracht sind, passiven Kühlkörpern und einem Control Board. Letzteres sammelt die Daten der Hashboards und verbindet den Krypto-Miner mit dem Internet.

Für eine ausreichende Kühlung werden spezielle Hochleistungslüfter benötigt. Aufgrund des hohen Stromverbrauchs der Hashboards entsteht eine hohe Abwärme innerhalb der Gehäuse und deren Umgebung. Beides, der hohe Energieverbrauch als auch die notwendige Klimatisierung, erfordern die Unterbringung (Hosting) der Miner in speziellen Mining Farmen.

Es ist nicht pauschal zu beantworten, wie lang die Lebensdauer eines ASIC Miners ist. Wir planen für uns selbst 3-5 Jahre ein, wobei es viele Faktoren gibt, die hier zusammengreifen. Regelmäßige Wartung und Pflege, ein gesundes Raumklima (warme Abluft und kühle Zuluft) und eine stabile Stromversorgung helfen, die Lebenserwartung eines ASIC Miners zu verlängern, bis die Hashpower eines Tages nicht mehr ausreicht, profitabel zu minen.

ASIC Miner sind groß, bis zu 20kg schwer, extrem laut, sie verbrauchen viel Strom und werden im Betrieb zudem sehr warm. Man darf also getrost behaupten, dass ein Krypto-Miner denkbar ungeeignet sind, um sie im hauseigenen Wohnzimmer, den Keller oder die Garage zu stellen. Insbesondere die steigenden Energiekosten würden kein profitables Krypto Mining zulassen.

Für den professionellen Betrieb eines ASIC Miners bedarf es einer ebenso professionellen Umgebung im Rahmen spezieller Rechenzentren, die ein optimales Raumklima sowie eine stabile günstige Stromversorgung und konstante Internetverbindung bieten. Darüber hinaus steht in den Mining Farmen geschultes Personal für Services wie z.B. Wachschutz, Monitoring, Cleaning, Repair etc. zur Verfügung.

Die Vorteile für ein Miner Hosting in einer geeigneten Farm sind nicht nur günstiger Strom, eine sichere Infrastruktur und die regelmäßige Wartung. Insbesondere Dein Kontakt zu uns als persönliche Ansprechpartner mit jahrelanger Erfahrung und Expertise schaffen Verständnis, Vertrauen und Zuversicht. Wir stehen Dir jederzeit zur Seite, wenn Du uns brauchst.

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