If you're new to crypto, Blockchain vs. Bitcoin can be quite confusing and even misleading. Some people mention Bitcoin when talking about blockchain technology, while others will refer to the blockchain when talking about cryptocurrencies in general. However, these terms are not really interchangeable: they are separate but interconnected concepts. Therefore, it is important to understand the differences between them. In this article, we will introduce you to the basics of blockchain technology, cryptocurrencies, and Bitcoin.
Blockchain: Concept
Most blockchains are designed as a decentralized and decentralized digital ledger. Put simply, the blockchain is a digital ledger, or essentially an electronic version of a paper ledger that records the list of transactions.
More specifically, a blockchain is a linear chain of blocks connected and secured by cryptographic proofs. Blockchain technology can also be applied in other areas that do not necessarily require financial activities. In the context of cryptocurrencies, blockchain has the role of permanently keeping a record of all confirmed transactions.
'Distributed' and 'decentralized' refer to the way the ledger is organized and maintained. To understand the difference, think about common central ledger forms such as public records of home sales, bank ATM withdrawals, or eBay's list of items sold. In each example case given, only one organization controls the ledger: a government agency, a bank, or eBay. Another common factor is that there is only one master copy of the ledger and any other copy is simply a backup copy, not an official copy. Consequently, traditional ledgers are centralized because they are maintained by a single organization and often rely on a single database.
In contrast, a blockchain is often built as a distributed system that functions as a decentralized ledger. This means that there are multiple (distributed) ledger copies and no single entity has the (decentralized) control. Put simply, every user participating in the blockchain network will keep an electronic copy of blockchain data. Blockchain data is regularly updated with all the latest transactions and synchronized with the user's copy.
In other words, a distributed system is maintained by the collective work of many users around the world. These users are also called network nodes, and all these nodes are involved in the process of verifying and validating transactions according to the rules of the system. Therefore, power is decentralized (without central authority).
➤ All terms in Blockchain technology that you need to know
Blockchain: Practical
Blockchain gets its name because of the way the records are organized: a series of linked blocks. Basically, a block is a data type, among other types, containing a list of recent transactions (like a printed page of entries). Blocks, as well as transactions, are public and visible, but they cannot be changed (like storing each printed page in a sealed glass box). When new blocks are added to the blockchain, a continuous record of linked blocks will be formed (like a physical multi-page ledger). This is a simple example to make it easy to visualize, but in fact, the process is much more complicated.
One of the main reasons why blockchain is resistant to modification is due to the blocks being linked and secured by cryptographic proofs. In order to create new blocks, people in the network need to engage in an expensive and intense computing activity called digging. Basically, miners are responsible for verifying transactions and grouping them into newly created blocks and then adding them to the blockchain (if certain conditions are met). They are also responsible for bringing new coins into the system, issued as a reward for their work.
Each newly confirmed block will associate with the block immediately preceding it. The beauty of this setting is that it is impossible to change the data in a block once the block is added to the blockchain because it is secured by cryptographic proof. The process of creating a new block is expensive and undo is extremely difficult.
In a nutshell, a blockchain is a chain of data blocks arranged in chronological order and secured by cryptographic evidence.
Cryptocurrencies
Put simply, cryptocurrencies are a form of digital money used as a means of exchange within a distributed user network. Unlike traditional banking systems, these transactions are monitored via a public digital ledger (blockchain) and can be performed directly between participants (peer to peer) without need intermediaries.
'Crypto' refers to the cryptographic techniques used to secure the economic system and to ensure that the creation of new cryptocurrency units and transaction validation goes smoothly.
While not all cryptocurrencies are minable, many coins, like Bitcoin, are dependent on mining, have slow growth, and are controlled on circulating supply. So, mining is the only way to create new units of coins and help avoid the risk of inflation that is a threat to traditional fiat currencies, where the government can control the source. money supply.
Bitcoin
Bitcoin was the first cryptocurrency created, and by nature, is one of the most famous cryptocurrencies. Bitcoin was introduced in 2009 by the developer Satoshi Nakamoto. The main idea was to create an independent and decentralized electronic payment system based on mathematical and cryptographic evidence.
Despite being the most famous cryptocurrency, Bitcoin is not the only one. There are many other cryptocurrencies, each with their own features and mechanisms. Moreover, not all cryptocurrencies have their own blockchain. Some are created on the basis of an existing blockchain, while others are created entirely from scratch.
Like most cryptocurrencies, Bitcoin has a limited supply, which means that no more Bitcoin will be generated by the system after reaching the maximum supply. Although this varies from project to project, the maximum Bitcoin supply is set at 21 million. Usually, total supply is public information that is determined when the cryptocurrency is created.
The Bitcoin protocol is open source and anyone can view or copy the code. The development of the project receives the contributions of many developers around the world.
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➤Learn more: Exploring All Practical Applications of Blockchain Technology