You may have come across people referring to Bitcoin and blockchain as being one and the same thing. But the reality is different and these two terms should not be used interchangeably. However, there is a close relationship between the two, something that needs to be understood to know how Bitcoin works.
What are Bitcoin and Blockchain?
The Bitcoin is the world’s first decentralized, digital currency which made its debut in 2009. The blockchain is a public ledger which has blocks of data storing records of transactions. This is an open ledger which means that anyone can view the records. The data contained in the blocks is replicated across a network of computers making it decentralized.
How are Bitcoins and Blockchain related to each other?
Unlike in a traditional database where records are processed by one administrator, the blockchain is transparent and data gets verified by consensus. Even though the blockchain may be an open distributed ledger, it remains totally secure. This is because there is no single point of attack that hackers can target.
Bitcoins operate on the blockchain technology; so, the blockchain had been developed for this purpose. In short, Bitcoin was the first application of this groundbreaking technology which has now found many uses beyond the crypto. Without the blockchain there would not be any Bitcoins.
Bitcoins are a decentralized P2P electronic payment system allowing users to transfer money anonymously across geographical borders. There is no third-party or middleman involved in this transfer. Like the Bitcoin, other cryptos are also powered by this technology. Therefore, the blockchain is used not simply by Bitcoins but also other coins; it is much more and bigger than the Bitcoin. Since the two were so closely interlinked, it took many years for tech experts to understand that the blockchain could find use in other industries too. Today, they feel that the blockchain has such a huge potential that it can revolutionize industries like fintech and healthcare. It is being compared to the dramatic transformations that our lives went through when the Internet made its debut.
How the Blockchain Revolutionizes other industries besides Cryptos:
The blockchain finds use in executing smart contracts. Since it can facilitate digital transactions it can be used to formalize digital relationships too. Using smart contracts, automated payment will be released when terms of these contracts are satisfied. This can save time, eliminate discrepancies regarding payments, and even resolve disputes between parties. With a blockchain you can have a shared and transparent ledger of records. This way all parties can view the ledger and access their assets securely. It is possible to trace ownership records for products right from their sources. This ensures that all records are complete and transparent.
To sum up, while Bitcoin is a digital currency, blockchain is the technology on which it is founded. It has many more uses besides the Bitcoin. So, from a business point of view, one should consider blockchain as next-gen software for upgrading businesses. Financial institutions are working hard to use it to change the way they operate. While the Bitcoin focuses on anonymity, blockchain promotes transparency. Bitcoin transfers money between parties, but the blockchain can transfer more than money; like property ownership rights and information between parties.