If you are new to the cryptocurrency world, you have undoubtedly heard the words “bitcoin” and “blockchain” mentioned constantly. Many often use the terms interchangeably. Although related, the reality is that each represents a unique concept. This article will help you understand the basic uses and differences between them.
What is Blockchain?
Blockchains are essentially electronic ledgers. Their entire purpose is to record transactions. In terms of cryptocurrencies, any time a coin is transferred, a permanent record of this action is securely added to a blockchain. Governments, businesses, and individuals also use and maintain ledgers for a variety of purposes. So what then differentiates blockchains from these traditional ledgers?
The most significant difference is that of ‘decentralization’. While the examples mentioned above involve a single specific entity that has control over all records, it is quite the opposite for blockchains. There simply isn’t any one single person or institution that oversees these transactions. Instead, all participants, regardless of their location, have a copy of and help maintain the virtual ledger.
In other words, every person that chooses to participate in this system becomes a network node. As such, they provide computing power to help verify, maintain, and secure transactions. Combined with cryptographic processes, blockchains are a much more secure and tamper-resistant option than their traditional counterparts.
What is Bitcoin?
Bitcoin is the first and most popular cryptocurrency ever created. It was designed to be anonymous, decentralized, and secure. To achieve its goals, the virtual currency uses blockchain technology at its core.
As mentioned above, each time a Bitcoin is transferred or moved, the transaction is recorded on the blockchain. Participants around the world offer their computing power to help secure and record these transactions. As a reward for their help in maintaining the system, these ‘miners’ receive newly generated Bitcoins.
The result of this system is an online currency that can instantly be shared all over the world. Users can remain anonymous as all they need is a computer, a virtual wallet, and an internet connection. In addition, because of its decentralized nature, there is no government that can control the supply of this currency.
- Bitcoin is a decentralized, anonymous, virtual currency.
- Bitcoin uses blockchain technology to securely record transactions .
- Blockchains are virtual ledgers maintained by users all over the world.
- Blockchains are also decentralized and employ cryptography to remain secure.
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