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The Differences Between Blockchain And Bitcoin

BitForex Editor
Oct 15, 2020

Launched only 10 years ago, the blockchain technology has developed into one of the biggest ground-breaking technologies, with the potential to impact every industry, from the educational institutes, manufacturing, financial, and also serving as the bedrock for the worldwide record-keeping system. Blockchain provided answers to the digital trust issues, as it is transparent and record important information in a public place, while not allowing anyone to change or remove it.

It paved the way for the use of virtual currencies or cryptocurrencies such as Bitcoin,  gaining appeal because of its promise of anonymity, bypass interference by a third-party authority such as banks, and the government, and also promises a lower transaction rate to that of online payment.

In the world of cryptocurrency, various terminologies used can be quite confusing and even misleading. The two terms that are often mistaken and are used interchangeably is Blockchain and Bitcoin. These two terms, although closely related are a bit different.

Knowing the difference is quite important, and that information will be provided in the article below.

What is Blockchain?

Blockchain is an open distributed ledger or simply is a computer file for the storage of data, a “Master Ledger”.  This data contained within the blockchain is duplicated and distributed across many computers making it decentralized, its most important feature.

This decentralization is what makes the use of Blockchain transformative because unlike traditional databases, where data are recorded and processed by one central administrator e.g a company -the entire blockchain process is transparent and data shared can be verified by user consensus.

Despite the transparency, the decentralization makes blockchain incredibly secure, because there is no single central point for hackers to target.

Blockchain has a much wider application beyond the Cryptocurrencies network. Some  blockchain application asides from Bitcoin include:

1.Smart Contract Execution; blockchain can be used to facilitate and formalize digital transactions through smart contracts. With smart contracts, payments can be automated and released once the term of the contract has been fulfilled. This helps to save time, build trust, and reduce discrepancies and solve disputes.

2.For maintaining a shared, transparent system of recording: blockchain provides the ideal solution for the maintenance of long-term secure, transparent recording of assets, that can easily be accessible to all parties securely.

3.Used in auditing the supply chain: Blockchain grants users access to track, and trace the ownership of good all the way back to its source. An example of this is a Diamond company that employs the use of blockchain to trace diamonds from the mines to the end customer. The information about the diamond easily accessible and transparent to the customer to check if the jewelry is from a conflict zone.

4.Provides proof of insurance: Blockchain is used by insurance companies to provide proof of insurance. This is of help to the police, customers, and insurers as it verifies insurance policies, and help to verify insurance claims quickly.

What is Cryptocurrency?

Cryptocurrencies or virtual currencies are alternatives, and digital means of exchange existing outside the bounds of state monetary policies, that is, the means of exchange is not regulated by national governments.

To secure units of exchange, cryptocurrencies uses extremely complex code to encrypt sensitive data transfer. Examples of cryptocurrencies include Bitcoin, Ethereum, Ripple, Litecoin, Dogecoin, Coinye, zCash.

All cryptocurrencies depend on the blockchain technology to function, and Bitcoin was the first mainstream cryptocurrency to utilize the blockchain technology.

What is Bitcoin?

Bitcoin is the first-ever cryptocurrency created and is also the most famous one introduced in 2009. It the world's most widely used cryptocurrency, using a decentralized digital currency. It is an electronic payment system that allows users to anonymously transfer Bitcoin without the interference of third party authority, such as banks or the government.

Transactions from Bitcoin are stored and transferred using a secure distributed ledger on a peer to peer network, that is open to the public and provides anonymity.

Because of the decentralized and peer-to-peer network used by the Bitcoin, participants on the network must agree to the validity of the transaction before they can be recorded. This agreement also called a “consensus” is achieved through a long process called mining. After the use of Bitcoin, miners engage in a complex and resource intense computational equations to verify the legitimacy of the transaction. To be considered a successful and valid transaction on the blockchain, there must be a record and proof of work to show that consensus was reached. With this validation, transaction records cannot be tampered with or manipulated after they have been added to the blockchain.

Bitcoin has a limited supply, meaning that new Bitcoin will not be generated after the max supply is exceeded. The max supply usually ranges from 21 million units.

Not all cryptocurrencies have their own blockchain, some are created on existing blockchains, while others are from scratch.

Why are the terms used interchangeably?

Bitcoin was the first example of a blockchain in action, without blockchain, there won’t be Bitcoin. The Blockchain is the technology that makes it possible for Bitcoin to trade digital currency.

Differences Between Blockchain And Bitcoin

1.Bitcoin is an example of a cryptocurrency, while Blockchain is the distributed database and the technology on which all cryptocurrencies are underpinned.

2.Bitcoin is powered by blockchain technology, but blockchain has found several other uses asides from Bitcoin.

3.Bitcoin promotes anonymity, while blockchain promotes transparency to be applied particularly in the banking sector.

4.Blockchain has a very strict “Know Your Customer” policy.

5.Bitcoin transfers currencies, while Blockchain helps to transfer many other things including information or right of ownership.

6.Bitcoin has a limited scope. While some countries are openly using it,  some have either banned or restricted it uses. The use of blockchain, however, has grown over the last decades with governments openly supporting and adopting the blockchain technology because of its guarantee of trust, transparency, and security of their database.

Conclusion

The use of blockchain, and Bitcoin as a record keeping system, and a fast-rising digital currency is fast gaining traction worldwide. The ease of use, transparency, makes it a ready alternative.

However, Blockchain can be used for so much for than Bitcoin data hose. It can be used for various tasks that require product verification, smart contracts, insurance policy and a lot more.

About BitForex:

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BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts,  derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.

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