What are the differences between blockchain and Bitcoin? It is true that when Bitcoin was first released as open-source code and the same solution had blockchain wrapped together.
That is why most people think that Bitcoin and blockchain are the same but actually it is not true in spite of their close relation. This article will clear all the misunderstandings regarding the two by letting you know the differences between them.
Typically, Bitcoin is the first application of blockchain which is the reason for all the confusion. The main intention of creating Bitcoin was to avoid government controls over currencies and make online transactions simpler with no intermediaries required to make any third-party payments.
However, it required something more than money to accomplish this. It needed a more secure and safer medium to make these transactions.
This is where blockchain comes in, which is a technology that stores all crypto transactions in a distributed ledger. Check out Differences Between Crypto ICOs and IPOs.
This P2P network is open, anonymous, and public and it is the blockchain that is the supporting technology which helps in maintaining the transaction records in a ledger.
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5 Differences Between Blockchain and Bitcoin
Though blockchain has been used in several other industries since the first time it was used with Bitcoin, people still often use Bitcoin inadvertently to refer to the blockchain.
Ideally, Bitcoin is a digital currency that is unregulated and created by Satoshi Nakamoto in 2008. Typically, Bitcoin is also known as a cryptocurrency but blockchain is the technology that helps in its operation.
Here are some other differences between blockchain and Bitcoin that will make you a more knowledgeable player in the crypto space.
1. Goals
The primary goal of blockchain technology is to record and distribute digital information that cannot be edited and is time stamped. It was first used by Stuart Haber and W. Scott Stornetta in 1991.
In theory, blockchain technology can record any amount of data points immutably which may be in different forms of transactions, inventories of products, votes in an election, deeds for homes, state identifications, and lots more.
Bitcoin on the other hand was released as the first real-world application of blockchain technology. It is due to this blockchain technology, the pseudonymous creator of Bitcoin Satoshi Nakamoto refers to it as a new P2P electronic cash system that will not need any trust or involvement of a third party while making a payment.
The key difference is that Bitcoin simply uses the blockchain technology to operate and to maintain transparency while maintaining the records of payments made in a ledger.
2. Use Cases
Blockchain and Bitcoin can be differentiated easily in terms of their respective use cases in the real world. Typically, Bitcoin does not have much of it at all since its main function is limited as a currency.
On the other hand, blockchain technology can be used for transferring currency, property titles, stocks, or anything that has a significant value.
It is used in both private and public sectors such as for storing public health records, land registries, incontrovertible voting platforms, identity management systems, and more.
Apart from the logistics and fintech companies, the other private companies that use blockchain technology include automobile, aviation, music, telecom, and others.
3. Scope
Blockchain technology has a lot of scope for its clarity as well as transparency. It promises exceptional growth and use cases in the years to come as it has shown in the past decade.
Its upward trend is even more supported due to the fact that several governments are looking out for more and better blockchain initiatives.
On the other hand, when it comes to scope, there is very little for Bitcoin. Though there are several countries that have accepted the concept of Bitcoin fully and openly, there are several others that have imposed a ban or restrictions on its use.
Most importantly, Bitcoin is not legally able to replace the legal tender of a nation.
4. Flexibility
Bitcoin and blockchain can also be differentiated on the basis of flexibility and the strategies they both follow. As for Bitcoin, the main strategy is to reduce the cost of influencers as well as the time of transactions. However, it is not flexible.
On the other hand, blockchain technology is much more flexible since it does not have any precincts like Bitcoin. In fact, it is due to the varied abilities and functionalities of Bitcoin that it is gaining such stupendous recognition.
Moreover, it can adapt to the changes easily and meet different needs for different industries.
5. Status
When you consider the existing status of both you will see that Bitcoin is poised to carry on maintaining its anonymity. Though the users can see the transaction in the ledger the numbers on it cannot be interpreted easily since there is no specific sequence.
On the contrary, blockchain needs to comply with different rules and regulations of the businesses that it works with. It is the KYC or Know Your Customer as well as other norms that make it easy to comply and deliver complete transparency in the long term.
Which is Better – Blockchain and Bitcoin?
Both Bitcoin and blockchain with their fundamental differences fit differently in the cryptocurrency domain.
While blockchain is a technology, Bitcoin is the first successful implementation of that technology. Which is better between the two is, however, a difficult question to answer.
As far as the cryptocurrencies are concerned, there has been a substantial boost in the demand in recent times.
It is not only considered to be a safer way to transfer funds but is also considered to be a worthy and productive resource for making money.
It is all due to the blockchain technology behind it that has enabled the user to make the best of its functionalities, with Bitcoin in particular.
According to the contextual definition of blockchain technology, it is considered to be an immutable and time-stamped record of data. It is managed by an assortment of computers called nodes.
These computers are not under the control or ownership of one single entity and hence a transaction is said to be complete when each of these nodes within a specific network verifies it individually.
A better integration is offered by leveraging the cryptographic processes. The most unique thing about blockchain technology is that it is never under the pressure of any central governing body.
Blockchain is a perfect democratized and decentralized system for making transactions with crypto coins.
It offers visibility of the records and more transparency due to its shared nature and immutability.
Authenticating a piece of information or data for a particular transaction is the liability of all the parties involved in the process.
Not one, but all can make modifications to the chain. Most importantly, providing a functionality of zero transaction costs blockchain is surely a worthy innovation of this modern world.
On the other hand, Bitcoin is just one specific type of several blockchain technologies. It facilitates in making peer-to-peer payments by leveraging this technology with low transaction fees, thanks to the decentralized network.
Through a Bitcoin wallet users can send, receive and store funds. A Bitcoin wallet may be downloaded on a PC or mobile phone to use it anywhere and anytime.
These coins can be earned either by trading or by requesting others to make payments in Bitcoin. There are also a few online games that can prove to be a good source to earn Bitcoin.
Therefore, blockchain is a digital and computerized payment gateway. It helps in recording the transactions made between two parties correctly and constantly.
This Distributed Ledger Technology is that which confines to Bitcoin and other digital assets.
Multiple parties can get involved in a transaction using the blockchain technology or share data between them. They can also pool in resources in the safest manner possible.
Blockchain technology is nothing new. It dates back to 1991 but it became popular and widely known only after the initiation of cryptocurrencies.
The fact that it is decentralized and difficult to regulate is due to its vital concepts of it which include:
- Blocks that make a chain and are central to this technology contain all the relevant and necessary data and information of a transaction. It has a unique hash and ‘nonce’ or ‘number only used once’ and is stored both linearly and chronologically as well. In fact, it is this arrangement that each block is added at the end of the chain when it increases making it difficult to go back to the previous ones to manipulate or disrupt the chain.
- Miners that create these blocks and help in the verification process typically get a reward in the newly generated coins. This is an extremely complex task taking into consideration the composition of the network.
- Nodes that make the system literally decentralized within the blockchain helps it to maintain reliability and avert an infringement to the privacy and anonymity of a transaction with any systematic or unsystematic switch of data and information.
Coming to Bitcoin, these are not held physically on any platform. Anyone can send or receive these coins that use a mathematical algorithm in order to protect the private and public keys that store the string of numbers.
The public key is just like your bank account number and the private key is just like the ATM PIN.
Bitcoin can be divided into small units up to 8 decimal places and the smallest unit is called a satoshi to commemorate the pseudo founder of Bitcoin, Satoshi Nakamoto.
It may seem a bit complex but Bitcoin is very easy to understand, convenient to pay, and fast to get paid. All you need to do is have a Bitcoin wallet and put the address of it on a digital currency platform.
However, experts think that blockchain has got a slight edge over Bitcoin because it is the technology that is used by all cryptocurrencies and also has a lot of other uses apart from regulating Bitcoin.
Smart contracts can be executed with the help of blockchain technology since this technology has the ability to release payments that are agreed upon automatically. In addition to that, blockchain technology can also help in:
- Executing and formalizing digital relationships via smart contracts to release automated payments when the term of the contracts is fulfilled. This not only saves time but also solves disputes and reduces discrepancies.
- Maintaining a transparent and shared system of record of payments and assets for the long term and all these can be accessed by all participants of the network easily and more securely.
- Auditing of supply chains is also facilitated by blockchain technology. All the records of ownership of goods can be traced to find the source all the way back.
- Providing proof of insurance using blockchain also helps the insurers, police officers, and customers to verify the coverage of any particular insurance instantly. This expeditesthe claiming process.
Developers also use this technology to create games based on a decentralized ledger that ensures making trustworthy transactions through Bitcoin much more easily, quickly and safely in comparison to a conventional banking payment gateway.
Even though the users do not need to register, payments do not go anywhere else apart from the desired wallet address, thanks to the decentralized blockchain technology.
To put it in simple terms, blockchain is designed as a computer file to store data.
And, in technical terms, it is a distributed ledger which means that the data contained in the blockchain is duplicated and distributed across several other computers for others to access and see the details of a transaction.
Therefore, it is decentralized. This is what makes blockchain technology so transformative and every data is verified by user consensus.
In spite of this transparency, blockchain technology is quite secure because it is designed to work without requiring any central authority which gives the hackers an easy single-point target.
Bitcoin makes the best use of this design and benefits of blockchain and both are linked inextricably. The technology endorses anonymity which is widely used and very helpful in specific sectors such as banking in particular.
Ideally, blockchain has a better and brighter future because it has and continues to dominate the internet space.
On the other hand, Bitcoin payments are being accepted by several merchants all over the world. Therefore, it too is here to stay but mainly due to the blockchain technology that runs it.
Conclusion
Blockchain is essential these days and may soon take over traditional payment gateways and even change the way payments are processed to ensure safety and ease. Bitcoin, though different from it, just facilitates it with its functionality.
I have special interest in crypto and intend to help common people to gain knowledge about the digital asset as well as its potential. Follow Me at Linkedin.
