In this blog article, we will learn the difference between Blockchain and bitcoin. Those who are eager to know about the exciting Blockchain technology are finding it difficult to learn it. Many will mistake the terminologies of cryptocurrencies like Bitcoin with the broader field of Blockchain technology.
Are Blockchain and bitcoin the same?
No, they aren’t. However, they are closely related.
Blockchain serves as a platform for cryptocurrencies (i.e. a digital currency in which the generation of currency units and verification of fund transfer are independently operated without a central bank), whereas Bitcoin is an application of it. Without Blockchain, there would be no Bitcoin!
Bitcoin is the first application of Blockchain, people confused Blockchain and bitcoin and vice versa. That’s how the misunderstanding arose between Blockchain and bitcoin. Even though Blockchain technology is used in many industries, there is a lot of confusion between these two concepts.
Now, let’s proceed further and understand the concepts of Blockchain and Bitcoin in-detail.
Bitcoin is an unregulated digital currency that lets individuals transact money across the world through Blockchain technology. It is also known as Decentralized Cryptocurrency. It was first created by Satoshi Nakamato in 2008 as an electronic payment system based on mathematical proof.
To avoid confusion, let’s separate Bitcoin as two components:
- Bitcoin-the-token – A code snippet that represents ownership of digital concept like virtual IOU (I owe you).
- Bitcoin-the-protocol – A distributed blockchain network that maintains the ledger balance of only Bitcoin tokens and no other cryptocurrencies.
A common confusion while talking about Bitcoin is the use of uppercase ‘B’ and lowercase ‘b’. In this blog, Bitcoin as a currency is bitcoin with a small ‘b’. Whereas Bitcoin as a protocol or a network is represented as ‘Bitcoin’ with a capital ‘B’.
Bitcoin was launched to avoid government authority and to simplify and legitimize online transactions by getting rid of third party intermediaries in a secure, verifiable and immutable way.
This is the future of currency and trade which is being followed by other cryptocurrencies. The main goal of introducing bitcoin is to tackle the issue of currency manipulation and loose banking system. Bitcoin is one of the most widely used cryptocurrencies, though others do exist such as Ethereum, Litecoin, Monero and Zcash.
The secure bitcoin transactions are transferred and stored in a distributed ledger on an open, public and anonymous peer-to-peer network. Users can get bitcoin either by accepting them for services and goods, or by mining (a complicated process of verifying the bitcoin transactions implementing specialized computers to implement unique and complex algorithms that are embedded in Blockchain technology).
Bitcoin is stored digitally in a highly secure wallet. If the user wishes to convert bitcoin to fiat money (i.e. legal tender whose value is backed by the government that issued it), they can always use cryptocurrency exchange to trade them with fiat money or other cryptocurrencies. But Developers implement third-party cryptocurrency exchange processing APIs such as Bitcointy, BlockChain, BNC Bitcoin B-WAP, Coinbase and Nexchange. By using these APIs, developers can enable applications to build cryptocurrency chatbots, receive and process cryptocurrency payments, and many other applications.
The value of bitcoin has sky-rocketed in recent years. Bitcoin leads the financial movement that has been pioneered in cryptocurrencies and has been created through an evolutionary technology called “Blockchain”.
Blockchain technology is an incorruptible system that maintains transparent record of new transactions. It is a public ledger that many cryptocurrencies use to make sure secure transactions and avoid risk of fraud occurring.
In the cryptocurrency language, a block is a record of new transactions which could be cryptocurrency location, voting records or medical data. Once the block is filled with new transactions, it will be automatically added to the chain forming a big ‘Blockchain’.
Blockchain technology has taken the internet to a whole new level by allowing digital information to be distributed and not copied in it. Transactions on a Blockchain is shared, continually reconciled, truly public and easily verifiable. For example, if you send bitcoin to anyone across the world, that information is publicly available to everyone on the Blockchain and transactions can be accessed easily by anyone on the internet hosted by millions of computers. Other people may not know the sender’s identity, but they can access information about any transaction between two people. There is no option for a hacker to corrupt the transactions since there is no centralized version. Also, Blockchain can be well described as “The Internet of Value” because it is possible to freely distribute money online without third-party intermediaries.
One of the best thing about Blockchain is that, it lives in the state of Consensus which means it automatically checks itself every ten minutes. In simple words, Blockchain is a type of self-auditing ecosystem of a digital value where in the network settles every transaction that occur in ten-minute intervals.
Now let’s see some of the key characteristics of Blockchain:
- Durability – Blockchain cannot be controlled by single entity and has no single point of failure since it stores blocks of information that are similar across the network.
- Robustness – Blockchain works just like internet but it has in-built robustness.
- Transparency – Transactions are embedded within the network which is public and immutable.
- Incorruptible – Transactions cannot be corrupted by modifying a single unit on the Blockchain because it uses huge amount of computing power to override the changes throughout the network.
Blockchain is not only related to the world of finance and restricted to currency creation, it is also revolutionizing different sectors and providing trust-worthy solutions to daily problems. Hence it is very important to note that the Blockchain technology is not same as bitcoin and related only to finance. Some key applications of Blockchain are:
- Smart Contracts – Smart Contracts let users exchange money, property, shares or anything of value in a transparent, conflict-free way without having the third party intermediaries. These Smart Contracts are also known as Blockchain Contracts, Self-executing Contracts or Digital Contracts.
- The Sharing Economy – In the sharing economy, Blockchain allows direct interaction between the parties by enabling peer-to-peer payments resulting in a truly decentralized sharing economy results.
- Crowdfunding – In crowdfunding, Blockchain potentially creates crowd-source venture capital funds by developing a peer-to-peer economy.
- Governance – Blockchain is a distributed database technology which makes regulation fully transparent and publicly accessible. This process can be automated easily by using Ethereum-based Smart Contracts.
- Supply Chain Auditing – Blockchain provides backstories of things for verification during purchase.