Bitcoin and Blockchain are the terms which you must have been hearing quite often, even if you are not very active in the crypto space. Most people initially get confused by considering both bitcoin and blockchain as the same thing, and it isn’t.
Let us get into the specifics of each of these briefly and see how they differ.
BITCOIN – ‘The Beginning‘
We can’t talk about the history of blockchain technology without first talking about Bitcoin. When Satoshi Nakamoto, whose true identity is still unknown, released the whitepaper Bitcoin: A Peer to Peer Electronic Cash System in 2008, Bitcoin was offered to the open source community in January 2009.
Bitcoin is a new generation of decentralized digital currency, created and operated only on the Internet that isn’t controlled by any entity. Essentially, Bitcoin is doing the same with money that the Internet did with communication.
There are no physical bitcoins, only balances kept on a public ledger, which – along with all Bitcoin transactions – is verified by a massive amount of computing power.
How Bitcoin Works
If you have been wondering how a new Bitcoin comes into existence, ‘mining’ is the answer. Computing power is used to solve the complex algorithm in each crypto transaction, a new block is then generated. Mining is the creation of new blocks in the bitcoin network.
The independent individuals and companies who own the governing computing power and participate in the Bitcoin network are known as “miners”. Miners are motivated by rewards in the form of the release of new bitcoins and transaction fees paid in bitcoin.
One Bitcoin is divisible to eight decimals and the smallest unit is referred to as a Satoshi.
Interestingly, 80% of the Bitcoins have been mined already and only around 4 million left to mine until Bitcoin’s 21 million supply cap is reached.
The most important features of Bitcoin are:
– Easy to use
Well, that’s good. What is the blockchain then?
BLOCKCHAIN – ‘Underlying Technology’
The Blockchain is the record-keeping technology that runs Bitcoin and other digital currencies.
At a basic level, blockchain is nothing but digital information (“block”) stored in a public database (“chain”). It is an online public ledger that records every single transaction that takes place across a peer-to-peer network. It allows market participants to transfer assets across the internet without the need for a centralized third party and money is tracked all over the web. What the internet is to email is that Blockchain is to Bitcoin.
The Blockchain is not just the hottest topic in the crypto world but also a sought-after technology across many industries. Many big organizations and venture capitalists are investing billions of dollars in the ‘blockchain technology’. This technology has the potential to impact every industry from financial to manufacturing to educational institutions.
There was a rise of investments and discoveries to see how blockchain could impact healthcare, insurance, supply chains, transportation, contract management, voting and more. Currently, around 69 percent of banks are experimenting with blockchain technology to make their services more secure, coherent and transparent.
Blockchain Technology Growth
- Global spending on blockchain solutions in 2018 was around $2.1 billion
- Global blockchain market is expected to be worth $20 billion in 2024
- 69% Banks currently experimenting with Blockchain Technology
- 33% Bankers expecting commercial blockchain adoption this year
- $8 – $12 Billion: Reported potential annual savings for banks utilizing Blockchain Technology
Blockchain Separates from Bitcoin
Even today, there are many who believe Bitcoin and blockchain are the same, even though they are not. Those who started to realize around 2014, that blockchain could be used for more than cryptocurrency, started to explore and invest in how blockchain could change many different kinds of operations. At its core, blockchain is an open, decentralized ledger that records transactions between two parties in a permanent way discarding the need for third-party validation. This creates an extremely efficient process and reduces the cost of transactions.
When bitcoin was the only blockchain, there wasn’t much of a differentiation between the terms and they were used interchangeably. As technology advanced and a variety of blockchains emerged, the adoption quickly diverged from the pure money aspect.
Contrasted with Blockchain, Bitcoin has to do with the use of tokens based on the distributed ledger technology.
Let’s explore in detail what the key differences between the two are.
Bitcoin vs Blockchain Key Differences
Bitcoin is a ‘crypto-currency’. Whereas Blockchain is a ‘ledger’.
Bitcoin’s main aim is to simplify and increase the speed of transactions without much government restrictions. Whereas, Blockchain’s agenda is to provide a low cost, safe and secure environment for peer-to-peer transactions.
Bitcoin is limited to trading as a digital currency. Whereas, Blockchain can easily transfer anything from currencies to property rights of stocks.
The scope of Bitcoin is limited. On the other hand, the Blockchain is more open to changes and hence has the backing of many top enterprises.
Bitcoin focuses on lowering the cost and reduces the time of transactions but is less flexible. Whereas, Blockchain can be adapted to any change and hence it can cater to different industries.
Bitcoin supports anonymity and hence even though we can see the transactions in the ledger, they are numbers which are not in any particular sequence. On the other hand, as blockchain works with various businesses, it should have compliance with KYC and other norms. Hence blockchain is very transparent.
Both bitcoin and blockchain have their own strengths and scope for growth. With millions and millions of cross-border transactions being done every day, bitcoin and blockchain are expected to make the lives of the people easier in this digital era.
Today, Bitcoin is just one among the several thousand applications that use blockchain technology. But the blockchain technology has more applications than bitcoin. It’s been a powerful decade of transformation for blockchain technology and it will be intriguing to see where the next decade takes us.