Many may have heard phrases in the field of cryptocurrency such as; “I’m investing in Bitcoin” or the alternatively misleading version, “I’m investing in Blockchain”, which may have both brought up questions and confusion regarding the two terms’ correct use and details.
Today, we’re here to provide answers to these questions and resolve this confusion for new investors such as yourself!
What is Blockchain Technology?
Blockchain is the underlying technology employed as a distributed ledger in the world of cryptocurrency. Its role is to provide technical support for the transfer of digital assets across the world in a faster, more efficient, and cost-reducing manner. Blockchain is decentralized, meaning there is no central figure, company, or organization in control of the network. The users or nodes in the system work in cooperation by verifying transactions to confirm their validity in the process of consensus.
Transferring Bitcoin starts with providing a transaction input into the blockchain network, a distributed ledger, for millions of nodes, located across the globe, to verify. Said nodes are provided with copies of the current transactions. Once the verification process is complete, a new block is created to store that set of newly validated information, forever in the blockchain, becoming immutable.
For this reason, blockchain technology has been recognized as a highly versatile and secure method of storing information for industries across the globe, as it cannot be interfered with by a central authority, nor can its contents be changed.
What is Bitcoin?
Bitcoin (BTC) is the world’s first digital currency. It was created by a person or group of people under the pseudonym of Satoshi Nakamoto in 2009 to function on the blockchain network as the world’s first decentralized means of electric finance. Its supply is limited to 21 million coins, with more produced when mined. Nowadays, Bitcoin has become one of, if not, the most well-known cryptocurrency as it also brought about the recognition of blockchain technology.
There are currently around 18 million Bitcoins in circulation and as mentioned beforehand, more are created through a process called “mining.” This process takes concern of the competition between in the blockchain network to solve mathematical equations for the chance of adding a new block to the blockchain. The first one to do so would also receive newly mined Bitcoins as a reward for their honest efforts. In short, equations are solved through the randomization of possibly correct answers, which can take a long time and immense computational power.
The Difference between Blockchain and Bitcoin
Up to this point, it has become clear that the two are entirely different, wherein blockchain is the underlying technology that functions as the distributed ledger for Bitcoins, the world’s first digital currencies, to be utilized and transferred by users.
It is for this reason that Bitcoins would not be transferred between users across the world, if not for the fundamental structure of the blockchain network, which also functions to support various other cryptocurrencies. Such coins include Ethereum, the birthplace of Decentralized Finance (DeFi), a new form of financial service building on the innovation of blockchain technology that operates without the need for middlemen or financial intermediaries.
Blockchain technology is a distributed ledger that provides secure and transparent operations in a decentralized manner, by employing the help of users’ across the world, rather than relying on financial institutions and organizations. Whereas, Bitcoin is a digital currency functioning on the blockchain network, allowing the freedom and security of value transfers.
Just like that, you’ve developed a fundamental understanding that Bitcoin is a digital currency or cryptocurrency, whereas blockchain is the underlying technology that facilitates the operations of Bitcoin and various other cryptocurrencies.