Tutorial TI - Information Technology - Digital Currencies - Find out what Bitcoin, Litecoin, and other Digital Currencies are

Just like anywhere in the world, and for many years, there has been a particular type of currency.

The coin has always been by far the most used in the oldest human history, and it persists to the present day.

But what can digital currency like Bitcoin change in your life in the future?

In the past, countless villages used, before there was money, other elements to exchange items of desire, such as animals, sheep, worked animal skins, and as the years passed, humanity began to exchange precious pieces, such as diamonds, silver, gold, and other elements.

They are all derived from work, you can't get gold if you don't work hard mining vast areas and lands and breaking rocks, just as you wouldn't have a sheep farm if you didn't work on taking good care of them.

But, what is "Digital currency"? Perhaps you have heard about Bitcoin somewhere, or even some distant acquaintance, but did not know exactly what it meant.

Currently, we work and we are used to using money for our transactions, and little by little, even substituting electronic transactions with credit, debit cards, direct transfer of values, or even via cell phone, wirelessly, touching the device to make payments.

The currency is currently controlled and centralized in a monopoly of power. A particular country could, for example, issue more notes than its domestic product just by printing more notes, with the detriment of rising inflation and currency devaluation against other currencies on the market, ruining the economy.

In addition, electronic transactions, rely on third-party technologies, to guarantee transactions such as X was transferred to Y, using a centralized database. You need to trust a banking institution and believe that it will ensure that your money is in your account, whenever you need it.

The beginning of bitcoin

In 1998, Wei Dai commented on a list of publications on the Internet, what a world would be like in which we would not have a centralizing body so that we can trust the dark, and issue and receive payments safely, without depending on a centralizing entity, without depending on the economy of a given country, something really free, and anonymous.

After 10 years, in 2008, the first codes of the Bitcoin program emerged, which was a specific algorithm to be the first digital currency in the world. The project was submitted by Satoshi Nakamoto, who then left the project, and left it as an open source project. Nobody knows exactly who this person is, because he sent the code but did not leave details of who it would be.

Currently, it is widely speculated who exactly this creator is, but nobody can confirm his existence or his identity anywhere. Many people in various places appear to be impersonating Satoshi Nakamoto, but without evident evidence that he is actually the author.

Satoshi Nakamoto, developed an algorithm, where you have a digital wallet, with an address, and can receive and send payments, and unlike currency or money, there is no centralizing body that takes care of or monitors or controls your payments, creating or elimination of banknotes (or coins), being something totally decentralized.

In a banking institution, all payment and money transfer transactions are recorded in a database, in the case of Bitcoin, the protocol was developed so that transaction information is distributed along with each individual's Bitcoin wallet, that is, you have your wallet, but you also have blocks of information from the network, containing records of distributed and encrypted transactions, sequential and validated, and even if you or certain people lose this wallet (and your data), everyone on the network will still have their values in their portfolios, as the data is replicated in all software (or peers) on the network.

Whenever someone performs a payment transaction, a new block is sent to the network, and a block of transactions is added to the block chain, which are encrypted and distributed to the network, once processed, taking 10 minutes to process each block.

Processing of transfer transactions

The Bitcoin algorithm, is extremely secure with respect to payment processing, using an algorithm based on high processing workload to validate transactions, and each processed block is a sequence for new payment transactions.

This entire workload is performed by workers, who mine the public blocks of the block chain, and each worker who mines an entire block, is rewarded by earning Bitcoins.

Data mining

Data mining, in fact as everyone says, is nothing more than receiving a block generated by the network, processing and validating your data, and whoever manages to validate your instructions in a valid manner, in the shortest possible time, is rewarded. At each block processed, at the beginning, the miner earned 50 Bitcoins, but every 4 years, the reward decreases, and today it stands at 12.5 Btc per block mined.

You can have your Bitcoin wallet, and make payment transactions, but you are not a miner (unless you want to).

To mine public Bitcoin blocks, you need specific software and hardware. At the beginning of the network, the blocks could be mined using CPUs, which can process a few thousand hashes of AES 256 per second, but today, given the number of miners in the network, a single block would take more than 200 years to process.

For this reason, many began to use the GPU to process this data, which can process much more in less time, reaching on some cards from 200 million hashes up to 900 million hahses per minute.

The term used in processing capacity is measured in hashes per second, Khash / s, Mhash / s, Ghash / s and Thash / s. The video card would then be 200 Mhash / s.

A 3rd Generation i7 processor, because it has GMA, can process using OpenCL, up to 11 Mhash / s, while an Nvidia GTX 660 can process up to 115.3 Mhash / s.

137.3 Mhash / s using a GTX 560 Ti.

GTX 660, producing 115.3 Mhash / s.
BitMinter.com is a mining pool site, and accepts enthusiasts to mine for pennies of Bitcoin as soon as an entire block is processed and accepted (1 block by Internet peers, BitMinter wins by the block processed, but divides the amounts through its users according to the processing power of each one).

Experts say they can achieve values of up to 900 Mhash / s using cards from the manufacturer AMD, which besides having a cost / benefit price to mine Bitcoins better than Nvidia.

All these processed data, once validated by the network, the worker is rewarded and earns his Bitcoins.

See photos of a Bitcoin mining company, located in Beijing, China, which manages to mine Bitcoin blocks and produce around 50 Bitcoins per day (around R $ 107 thousand in the current BTC quotation):

Countless connected machines all working to mine data from the Bitcoin network, in a mining company with a secret location in Beijing.

In pursuit of higher processing power

In addition to video cards, the company AsicMiner has developed specific hardware to mine Bitcoins, or better, a specific hardware to generate hashes based on AES 256 encryption with high processing power and with the lowest electric cost already existing, surpassing the GPUs more advanced.

Asicminer Block Erupter Usb Bitcoin Miner 336 Mhash / s Asic.
The sale on the Free Market for approximately R $ 150.00.

Given this hardware, it is notorious that with only 1 of this, the GPU becomes obsolete, far exceeding the processing power (at least for hashing).

Below, a machine that generates 5 Ghash / s, and can generate up to 0.097 BTC per day (24 hours on). At the current price of US $ 650 per BTC, the value would be US $ 63.05 or R $ 201.00 per day.

Buterfly Labs, the machine that can generate 0.097 BTC per day.
It consumes 30 W of energy, so the electrical consumption in your account can increase as well.

Bearing in mind that as the network's difficulty increases, 5 Ghash / s will soon become obsolete (if it is not already).

Machine that can generate 500 Ghash / s.

50 Ghash / s, sold on the manufacturer's website for $ 2499.

In the year 2100 approximately, there will be no more rewards for workers, so we still don't know what will happen to the currency, whether it will cease to be traded, or whether companies will process their blocks in exchange for values to process transactions.

Because of this, the future of the currency is uncertain, mainly because the workload and complexity and processing power to process new data, has gradually increased.

The first security breach

In 2010, a serious error occurred, and more than 180 billion Bitcoins were generated improperly in transactions not validated in the blocks due to a failure in their validation. The adjustments have been made and all invalid transactions have been removed from the network.

Other mills

The other currencies were created based on the principle of the Bitcoin algorithm. Following success, today 1 BTC = $ 650, other currencies are starting to emerge now, and also make use of a decentralized payment network, and block mining and processing rewards. Some of them can be mined using even the CPU, due to their recent appearance.

LiteCoin -> https://litecoin.org/ 1 LTC = $ 4, based on a new algorithm called Scrypt.

Ethereum -> http://ethereum.org/ 1 ETH = $ 11, based on AES 256 and 2048-bit hash (instead of BTC, which is 1024 bits).

And other currencies are in existence.

See other currencies and their quotes at https://www.digitalcoinsexchange.com/ .

Each of them, you may need specific hardware, GPU with specific software, or even CPU.