In a clear example of how code and hardware exist in a relationship that can be understood as a feedback loop, two Bitcoin-specific hardware products have been announced in the past days.

The Bitcoin protocol has given birth now to a new kind of chip, especifically designed to maximise the speed of Bitcoin cryptographic calculations while minimising electricity consumption. The first generation of Bitcoin ASIC (application-specific integrated circuit) mining hardware has been announced by a company called Butterfly Labs. The processing power of ASIC hardware is an order of magnitude beyond the hardware currently used by miners, so it’s inception later this year promises to completely transform the field. The economic implications are uncertain, beyond the confirmation of a trend towards the profesionalisation, and the further rising barrier of entry to Bitcoin Mining.

The complexity of the development of Bitcoin ASIC processors should not be overlooked. The development of a new category in computer hardware is a very significant development in itself, a sign of the underestimated vitality inherent in the Bitcoin protocol.

At the other end of the Bitcoin life-chain (the end user) hardware consistent with the protocol is solidifying too. The Bitcoin Card is the first physical, off-line, Bitcoin wallet. The device promises a huge step forward in simple everyday usability for Bitcoin. The solar-powered Bitcoin Card has the size and thickness of a credit card, and yet it offers the user the ability to anonymously perform Bitcoin transactions with other nearby users or points of sale “via an ad-hoc mesh network that doesn’t require internet”.

Form the article:

• Next, YES, the device is real. We saw it, touched it, and used it. There were several iterations of the device on sight, which used slightly different materials (from several rounds of production). However, what we saw/touched/used were prototypes which are not as thin or attractive as the production version promises to be. Given some of the component technology showed to us, I have no doubt that the production version will be slick as hell.

• The system’s infrastructure requires two components. One component is the card (which normal people will have) and the other component is a USB dongle (which some merchants and/or users will have). The cards communicate with each other via an ad-hoc mesh network that doesn’t require internet. To communicate transactions to the internet, the dongle picks up this information from nearby cards and relays it to the web. A town of 10,000 people could all use the cards within their community, but for interaction with the outside world, there needs to be at least one dongle in there somewhere plugged into a computer.

• The device is the size of a credit card (and the production version will be the thickness of a credit card, amazingly). It will be able to fit in your wallet.

• The device has zero ports on it. No power charger, no USB, no proprietary connection, etc.

• The mesh-network range of the device is 200-300 meters in open air, less if there are walls or other interferences.

• All power comes from the solar panel back of the card and this is fully adequate to power the device with near-continuous usage. You do not need to leave it in the sun for 4 hours before using it. The card picks up enough energy from daily use that it can be used without ever spending time to charge it.

• It was also discussed that the production version of the card would alternatively obtain power whenever the user presses the buttons, or when the user bends the card back and forth slightly. Alex conveyed there is a 60% chance that the production version will not have the solar panel at all, but will instead draw power from these other methods exclusively.

• Some people on the forums have (probably correctly) said that the alleged features of this card are impossible using any existing technology. This is because Megion’s technology is not available on the market. Again, Megion’s engineers developed many of the components in-house. What is in this card is better technology than what is available in the marketplace.

• Megion has several projects, and The Bitcoin Card is only one of them. We were not given any details of their other projects but I do not believe they are Bitcoin related. These several projects help explain how they have cost-effectively produced the technology in The Bitcoin Card (the R&D is likely spread across their projects).

• The devices hold private keys on them. These can be backed up via the company’s website, but it is not necessary to ever interface with the company in order to use the device. In other words, someone can use the device anonymously and without creating any accounts anywhere.

• If you lose the card and have not backed up the keys, your money is gone.

• In order to pay someone with the card, you press the “Pay” button and a small list of nearby devices appears. Each device has a unique alias/name. You scroll down to the device you wish to pay, select it, enter the amount to pay, and submit. Thus, you do not need to enter any ugly BTC addresses in daily use.

• If you wish to pay out to a normal BTC address, you will be able to enter it on the card (but obviously this is tedious). It is likely that the solution will be a linked ewallet-type account paired to your device. If you wish to send to a normal BTC address, you’d use the ewallet via the web on a computer or mobile phone.

• Merchants who wish to accept payments from the cards should have the USB dongle which allows updated pricing from the web and will check payments for validity.

• An overarching design principle of the devices is to eliminate the requirement of trust in any single party, even in the manufacturer. Details of how this is accomplished are not fully fleshed out yet, but include ideas like having the devices only create their key pair after they are in the consumer’s hands (so not even the manufacturer would know it).

• The device will, over time, integrate with various Bitcoin systems to make funding convenient. For example, BitInstant will be integrated so that you can send funds to your card from BitInstant’s website via the various funding methods available there (Russian cash deposits to secret Russian Bitcoin smart card FTW).

• The device is planned to go into production around January 2013. Megion is considering various options for the funding and distribution of these cards. This might include arrangements like BitInstant paying for 5,000 cards and getting them at a discount, and from there can brand them and sell them to customers.