December 22, 2019 | Julia Beyers |Wadnews.com
Most people automatically think about ways to buy bitcoin when they hear of blockchain. So close are the two that some individuals use the words interchangeably in their conversations and they can be forgiven for doing so. But are the two really the same thing? Well, we decided to take a look at the two technologies, differentiate them and shed more light on their relationship.
So, what is blockchain? How is it different from bitcoin?
This is a very complex technology that is used to decentralize the storage of digital information into public databases. The decentralization is used to eliminate the monopoly of control which some financial government institutions have enjoyed for years. Introduced by Stuart Haber and W Scott way back in 1991, the technology only came to light a few years ago when cryptocurrencies came to the fore a few years ago.
The premise of financial technology is to store digital information in numerous blocks that are interlinked for ease of communication but decentralized to take control away from a single entity. The blocks are connected in one ‘chain’ which makes communication between the separate blocks very easy hence the name blockchain.
Every individual block on the chain holds digital information which plays a key role in the network. The blocks in blockchain can be differentiated into three categories. The first category holds specific information about transactions e.g the date and time of a given transaction, the second block has information on the people who are making the transactions and each user is identified using a special digital signature instead of the personal addresses we are used to.
The final group of blocks has information which helps differentiate the various blocks in the chain for easy identification of transaction and other activities within the network. Every transaction is unique in its own way and there is no way two transactions can be identical.
This modern technology is open-ended in nature in that anyone has access to the contents of a chain and users are free to add their computers to the existing networks. This essentially means that the people have all the power to control what happens within the chain and this is why it became so popular.
It is also imperative to note that it is very secure and this explains why cryptocurrencies are based on this technology. But what exactly are cryptocurrencies?
These are internet digital currencies that leverage blockchain and cryptography technologies to enable transactions between users globally on the internet. Bitcoin is an example of a cryptocurrency. The oldest and most popular cryptocurrency coin, BTC has almost become synonymous with cryptocurrencies despite the fact that there are very many other cryptocurrencies in existence today.
Since it was launched back in 2009, BTC has become the global mark for cryptocurrencies and surprisingly it heralds the blockchain technology as well. Whenever people are talking about blockchain, the legendary coin automatically comes into mind.
All through the ups and downs of bitcoin over the years, the term blockchain has stuck with the coin and this explains why very many people confuse the two things. Here is a closer examination of the relationship that the duo shares.
How Exactly Are They Related?
The key relation between the two is the fact that bitcoin and all cryptocurrencies are based on blockchain technology. The former is really the first product of blockchain which hit the mainstream and has been successful and has helped the innovation to gain traction in different industries.
One is a cryptocurrency while blockchain is a digital database storage forum that helps to decentralize the storage of important digital information. And this is the key differentiating point between the two. The only real reason the two are so closely related is the way the media plastered the terms everywhere without proper explanation leaving many very confused.
As part of differentiating the two technologies, it is imperative to note that the blockchain technology has more uses than just in cryptocurrencies:
- Companies use the technology to make automated digital contracts where payment is remitted immediately the requirements of the digital contract are met. These digital contracts save companies a lot of time and make all the details are verifiable
- Some companies use blockchain to countercheck the transactions made by their procurement departments. Companies can trace all the transactions made all the way back to the suppliers. This helps to foster transparency in companies.
- Blockchain can be used to provide widely available records for people within a certain network. This technology is especially very practical for multinational companies that require coordinated efforts from all their employees. All the information is available for all within the network making work very easy.
- Some companies are opting for the blockchain technology to show proof of subscription to their services. A good example is the Insurance Company Nationwide which partnered with a technology company to enable authorities to track if users are indeed part of their insurance coverage or not. This aspect of blockchain is open to very many possibilities and in the future, more companies will take advantage of it.
The other difference which we have to highlight is the fact that blockchain advocates for decentralized systems that are available to the public while bitcoin is all about private anonymous transactions. It real is ironical that a bitcoin that employs the blockchain technology promotes anonymity while the parent technology advocates for open, non-controlled transactions within the networks
In conclusion, we can note that although the terms blockchain and bitcoin are often used together, they represent two totally different technologies. As more cryptocurrencies are getting into the mainstream transactions and talk of cryptocurrencies finally taking over from fiat currencies, more people will get information on the two technologies and cases of confusion will become fewer.
The next time someone confuses bitcoin with blockchain, do not hesitate to school them a little bit now that you have the information on the relation between blockchain and bitcoin. Even better, you can refer them to our link so that they can get more information on the subject matter.