What is mining in relation to crypto currencies?
The bitcoing business has long since reached most banks and the mainstream and is no longer practiced only by geeks and nerds. Therefore there is a very big competition in the bitcoin mining environment and not all who use bitcoin for a payment process have produced it themselves. Generally one can say that with the current status of most crypto currencies it only makes sense to start mining as a small private user, if you want to make it for fun and profit is not the first priority. Meanwhile it is already so far, if one wants to mine Bitcoins based on a certain Hashrate, one can do this possibly more favorably, if one signs a so-called Miningcontract, than to buy oneself the whole hardware.
What is done technically?
All Bitcoinminer make the computing power of their computer or special Miner available to the network. The entire network uses this computing power to solve a cryptographic task. This cryptographic task is also referred to as "proof of work". With this "proof-of-work", the creators of crypto currencies wanted to ensure that a considerable effort had to be made to create a valid block. Due to this effort, it is almost impossible to manipulate the block chain (block chain) afterwards. If more computing power is now available in the network, the cryptographic task should be easier and easier to solve and the cryptographic currency should be "produced" ever faster. To avoid this effect, the difficulty of the task is dynamically adjusted. The task is always so "difficult" that on average a new block is created every 10 minutes, no matter how high the computing power is. The difficulty is adjusted to the computing power every two weeks.
Which hardware is required?
Now you could easily get the impression that all you need to start and get started is a PC. That is basically true, but it would be highly unprofitable. With the computing power of a simple CPU, in a PC, it was only possible to work reasonably profitably at the very beginning. However, very quickly mining was only really profitable with GPUs. But even with these it soon became very difficult to work profitably, because the computing power which one had to feed in became ever higher. So more and more graphics cards were needed and of course they consumed more and more power. Since the share of electricity together with the hardware costs increased more and more, the so-called FPGAs (Field Programmable Gate Array) were soon used. FPGAs are expensive to buy, but offer very high computing power at a very low power consumption. Due to the ever increasing degree of difficulty of the task to be solved, ASICs will soon be used. To put it simply, these are graphics chips that are attached to a power supply unit. These ASICs were specially developed to gain crypto currencies.
Which software is required?
There are now three different ways to generate a crypto currency. Of course, you can do it on your own. In most cases, however, this should no longer be profitable. The second option is to join a mining pool. The third possibility would be cloud mining. With cloud mining, you rent hardware on the Internet and let others calculate for you.
There are quite a few mining pools nowadays. By providing computing power to a pool, each member generates a certain profit when calculating a block. The profit that each produces is divided by the number of members and then paid out. A big advantage of a mining pool is that you can count on regular payouts. Since the prize is always divided by the number of members, the payout is usually slightly smaller but regular.
Cloudmining is actually the easiest and most convenient way to mine a crypto currency yourself. Here almost everything is taken from the user by an external company. The only thing the user has to do is to set up a wallet or use an existing one. Sign the lease for the Cloud-Miner and off you go with the Bitcoinmining.