Difference Between Bitcoin and Blockchain
Key Difference: Bitcoin is a cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user-to-user on the peer-to-peer bitcoin network without the need for intermediaries. A blockchain is essentially a distributed database of records or public ledger of all transactions that have been executed and shared among participating parties. Each transaction in the public ledger is verified by consensus -- a majority of the participants in the system.
How are Bitcoin and Blockchain different?
Bitcoin is a type of unregulated digital currency that was first created by Satoshi Nakamoto in 2008. Also known as a “cryptocurrency,” it was launched with the intention to bypass government currency controls and simplify online transactions by getting rid of third-party payment processing intermediaries. Of course, accomplishing this required more than just the money itself. There had to be a secure way to make transactions with the cryptocurrency. Bitcoin transactions are stored and transferred using a distributed ledger on a peer-to-peer network that is open, public and anonymous. Blockchain is the underpinning technology that maintains the Bitcoin transaction ledger.
To better explain blockchain Medium.com sited an example’ Imagine that you sent 100 $ to your aunt in Brazil by bank transfer. You filled in a dozen fields in the form of a transfer, after which the bank officer debited the money from your personal account and credited them to a single bank account for international transfers. Then another employee transferred this money to the account of the agent bank that transferred them to Brazil, where they will fall on the same chain to your aunt’s personal account.
Three days later, your aunt will receive 97$ (minus commissions of all banks) — if there was no mistake in the transfer. The worst thing is that none of the participants are able to track this money during these 3 days.
A sudden server crash, a banker’s dishonesty or a hacker attack will start a long investigation and find the person responsible for the return of your money. But the same can happen at any time with all the money in your account. Hence, you have to rely on the system every day and trust your bank.’
Blockchain has the capacity to change the situation completely. Your transaction will be conducted in seconds and safely stored on the chain. So, each participant of the system can track the transaction down, without revealing your identity.
How does the Bitcoin and Blockchain work?
According to IBM.com ’The Bitcoin blockchain in its simplest form is a database or ledger comprised of Bitcoin transaction records. However, because this database is distributed across a peer-to-peer network and is without a central authority, network participants must agree on the validity of transactions before they can be recorded. This agreement, which is known as “consensus,” is achieved through a process called “mining.”
After someone uses Bitcoins, miners engage in complex, resource-intense computational equations to verify the legitimacy of the transaction. Through mining, a “proof of work” that meets certain requirements is created. The proof of work is a piece of data that is costly and time-consuming to produce but can easily be verified by others. To be considered a valid transaction on the blockchain, an individual record must have a proof of work to show that that consensus was achieved. By this design, transaction records cannot be tampered with or changed after they have been added to the blockchain. consensus was achieved. By this design, transaction records cannot be tampered with or changed after they have been added to the blockchain.’
Bitcoin Vs Blockchain
Bitcoin is anonymous, price is volatile and “permission-less” -- It does not reveal identity or offer privacy. This has led to various reports on the role of Bitcoin in illicit activities. Bitcoin price is volatile
But in case of blockchain, it is poised to change how people do business by offering trust. Transparency, speed, cost, simplicity is the USP of Blockchain. If you send information on the blockchain, the evidence of such transaction cannot be changed or faked, as it is confirmed by hundreds of thousands of computers around the world. Your data will always be safe and sound, no leakage, no loss.
Blockchain technology is finding application in wide range of areas: Banks can use blockchain to make secure, low-cost and faster transactions. Beyond financial transactions, blockchain technology can be used to put proof of existence of all legal documents, health records, and loyalty payments in the music industry, notary, and private securities. By design, anything recorded on a blockchain cannot be altered, and there are records of where each asset has been. So, while participants in a business network might not be able to trust each other, they can trust the blockchain. The benefits of blockchain for business are numerous, including reduced time (for finding information, settling disputes and verifying transactions), decreased costs (for overhead and intermediaries) and alleviated risk (of collusion, tampering and fraud).
Image Courtesy: smartereum.com,mhlnews.com
Add new comment