For some, crypto represents the future of our financial system, for others it is intangible or even poses a threat. As an investor, you should understand cryptocurrencies, because their influence on the financial market will continue to grow in the coming years.

Basically, cryptocurrencies are a form of digital cash that allows individuals or businesses to transfer value in a digital environment.

Currencies such as the euro or US dollar are also called fiat currencies. The latter are usually based on physical trading, the assets are backed by institutions and, in the case of a purely digital transfer, they are centrally monitored. 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-time Nobel Prize nominee)

The beginnings of blockchain technology date back to the 1970s. The basic idea behind various cryptography experiments was to create a decentralized database that would enable tamper-proof digital entries through cryptographic encryption. The blockchain generates tamper-proof originals from digital data (e.g. account balances).

Banks would no longer be needed, at least for money transfers. While a bank stores data on central servers that can be manipulated and at most have a few backups on other servers, cryptocurrencies store a copy on so many nodes that they are always available. Values ​​can be transferred without the intervention of third parties and with virtually no authorization. Anyone with an internet connection can transfer money. This decentralization ensures that payment flows are completely automated. Money transfers become cheaper, faster and safer.

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

“Bitcoin is a remarkable cryptographic achievement and the ability to create something in the digital world that cannot be duplicated has enormous value.” (Eric Schmidt, former CEO of Google)

There were attempts at digital cash programs in the 1990s, but it was not until 2009 that the first cryptocurrency was finally released: Bitcoin. To this day, the true identity of the creator, who goes by the pseudonym Satoshi Nakamoto, remains unknown.

Bitcoin triggered a real hype and gave rise to a large number of subsequent cryptocurrencies, at times more than 20,000 different ones, 90% of which had no added value. Behind some successful cryptocurrencies are complex, state-of-the-art companies and technologies, usually 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 to be identical, as both are traded on exchanges and can be sent back and forth between blockchain addresses. While cryptocurrencies serve as money, a means of exchange or a coin, where each unit is worth the same, a token can be used for a variety of decentralized applications and is therefore more flexible. Millions of identical tokens can be minted, which, like cryptocurrencies, also serve as currency, but individual tokens can also be equipped with unique properties. They could be used as receipts, shares in companies or loyalty points.

A distinction is made between cold wallets, a specially developed piece of hardware from Ledger, for example, 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. Using a crypto wallet, you can store cryptocurrencies, send or receive money, and record transactions.

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

In contrast, there is the Proof-of-Stake system, which Ethereum joined in mid-September 2022. Since then, Etherium can no longer be created by miners. Values ​​are built up through the staking principle. You receive 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 has built will extend the chain (blockchain). As a result, you will 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 a so-called mining pool. Thousands of miners pool their computing power and share the block reward.

Before we talk about mining hardware, it should be made clear at this point that it takes many times less electricity to generate a Bitcoin through mining than the same value in euros, for example, in the banking sector. When choosing the mining method and hardware, however, the location with its local energy prices plays the biggest role when it comes to assessing whether a miner is mining profitably or not.

We help you to acquire suitable, powerful and efficient miners. We primarily use so-called ASIC miners (Application Specific Integrated Circuit), which are designed specifically for such mining operations. At the same time, we know of specialized data centers, so-called mining farms or mining hotels, in order to operate your mining hardware in an optimal environment with low energy costs.

In a mining pool, a large number of miners are joined together to form a common network. The aim is to generate the necessary hashrate, i.e. a bundled power of computing power, in order to generate block rewards together.

These profits are then automated and distributed to the participants of the mining pool according to the hash power used. The bundling of computing power also 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.

For Bitcoin, Etherium Classic and Kadena we recommend F2Pool and for Litecoin NiceHash. We support our customers in setting up these mining pools.

The hashrate is a common metric in the area of ​​cryptocurrencies, where all types of data 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 the SHA-256 algorithm used in Bitcoin. The hashrate (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 carried out 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 must be made available within a network to create an additional block and attach it to the blockchain. The higher the difficulty, the more computing power must be used for a block reward. It must also be continuously adjusted so that the creation and validation of a block remains constant over time and no falsifications can occur in the network.

The acronym ASIC stands for Application Specific Integrated Circuit.

ASIC miners are high-performance computers that were designed solely for the purpose of crypto mining and cannot be compared to ordinary home computers or servers. An ASIC miner usually consists of several hashboards on which the ASIC chips are mounted, passive heat sinks and a control board. The latter collects the data from the hashboards and connects the crypto miner to the Internet.

Special high-performance fans are required for sufficient cooling. Due to the high power consumption of the hashboards, a lot of waste heat is generated within the housing and its surroundings. Both the high energy consumption and the necessary air conditioning require the miners to be housed (hosted) in special mining farms.

There is no general answer to how long an ASIC miner's lifespan is. We estimate 3-5 years for ourselves, although there are many factors that come into play here. Regular maintenance and care, a healthy indoor climate (warm exhaust air and cool supply air) and a stable power supply help to extend the life expectancy of an ASIC miner until the hash power is no longer sufficient to mine profitably one day.

ASIC miners are large, weigh up to 20kg, are extremely loud, consume a lot of electricity and also get very hot when in use. It is therefore safe to say that a crypto miner is not suitable for placing in your living room, basement or garage. In particular, the rising energy costs would not allow profitable crypto mining.

The professional operation of an ASIC miner requires an equally professional environment in the form of special data centers that offer an optimal room climate as well as a stable, inexpensive power supply and a constant internet connection. In addition, trained personnel are available in the mining farms for services such as security guards, monitoring, cleaning, repairs, etc.

The advantages of hosting miners in a suitable farm are not only cheap electricity, a secure infrastructure and regular maintenance. In particular, your contact with us as a personal contact with years of experience and expertise creates understanding, trust and confidence. We are always at your side when you need us.