Bitcoin is the first fully implemented cryptocurrency. A cryptocurrency relies on cryptography to generate and validate transactions that become the currency itself. This data is decentralized, meaning it is stored on computers all over the world and it is shared using peer-to-peer technology. Digital counterfeiting is avoided by using a proof-of-work scheme; a concept that works well but cannot be easily explained.

Bitcoin uses SHA-256 as its proof-of-work scheme, but Litecoin, an alternative to Bitcoin, uses scrypt, a password-based key derivation function. Bitcoin and Litecoin are the two most popular cryptocurrencies. They are not compatible with each other, and require different hardware or configurations to work or mine with them. As of writing this chapter, there are more than fifteen currencies and hundreds of other implementations trying to get a place in the spotlight.

In this chapter, we will learn more about Bitcoins, the mining of Bitcoins...