It's not a technology that you'll find designed into the latest gadget, but it's a technology that might help you buy that latest gadget. It's Bitcoin and it's hot. To see how hot, just check out the chart below:
So what exactly is Bitcoin? It's been described in many ways – “open-source P2P money,” “digital money,” “crypto-currency,” and even “gold 2.0.” And it is all of those — an open-source, peer-to-peer, electronic money and payment network that uses cryptographic technology for both “frictionless” secure transaction processing and the “mining” of bitcoins themselves. See this short video (1:44) for a quick overview.
On the transaction processing side, users transfer payments between Bitcoin “wallets,” which store cryptographically generated addresses. A private key is used to digitally sign transactions and confirm that the transaction is coming from the owner of the wallet as well as help secure a transaction from being tampered with after the fact. Every transaction is broadcast and validated by other computers on the network.
“Mining” is the activity by which bitcoins are created and is intentionally designed to require significant computer processing resources to solve algorithms, resulting in the creation of new blocks in a block chain. This process is designed to maintain a consistent block creation rate and thus control the increase in supply of bitcoins. (The rate of Bitcoin creation is designed to halve every four years, until a total of 21 million bitcoins have been created.)
Originally, Bitcoin mining was performed on standard CPUs until it was found that high-end graphics cards were more efficient, given the massive parallel architecture of some graphical processing units. Later this evolved to FPGA-based Bitcoin mining hardware, which used devices like Xilinx's Spartan-6 and Altera's Stratix III FPGAs. More recently, dedicated-ASIC-based Bitcoin mining hardware (such as the Monarch 600-GigaHash Bitcoin Mining Card) have become the norm and are much more efficient for the power they consume. And here power efficiency is key — the more efficient a device, the more profitable.
As Bitcoin mining has become more competitive — with more miners competing for a limited supply of blocks — it is now an activity that is only feasible for mining pools. Here, multiple users join together to mine Bitcoins, then split the block reward based on the contributed processing power. For more on Bitcoin, see the original paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” or visit the Bitcoin wiki.
This article originally appeared on EDN as part of its Hot Technologies: Looking ahead to 2014 feature, where EDN editors examine some of the hot trends and technologies in 2013 that promise to shape technology news in 2014 and beyond.