Blockchain is one of the formidable names that frequently come up in many discussions on modern technology worldwide. However, the understanding of blockchain technology is often confused with that of Bitcoin. So, if you have used Blockchain as an alternative for Bitcoin or vice-versa, then you are not the first!
The Bitcoin vs. blockchain debate is common, as Bitcoin is the first popular implementation of blockchain. Most important of all, Bitcoin has monopolized the thought of people about blockchain technologies. After introducing blockchain as the underlying technology for Bitcoin in 2008, the bigger benefits of blockchain have achieved wide-spread recognition worldwide.
Now, it has expanded beyond the scope of cryptocurrency to emerge as one of the promising solutions for enterprise applications worldwide. The following discussion expands the understanding of blockchain vs. cryptocurrency, with an in-depth explanation of what both terms mean.
The only aspect which can define the differences between blockchain and Bitcoin is the conceptual difference between both. Majority of blockchains are tailored as distributed, decentralized ledgers in the digital format. Blockchains are digital ledgers for recording a list of transactions in an electronic version. Diving deeper into blockchain, it is practically a consecutive chain of different blocks connected and verified for security through cryptographic proof.
Blockchain technology is also applicable in various activities that do not depend necessarily on financial operations. However, the use of blockchain for maintaining a permanent record of multiple confirmed transactions creates ambiguities in Bitcoin vs. blockchain debates. Distributed and decentralized are the two terms that are primarily responsible for the confusion. They are the approaches for organization and maintenance of ledgers. In most cases, people confuse these elements as features of blockchain and Bitcoin.
In order to obtain clarity on the difference between blockchain and Bitcoin, it is important to assume examples of centralized ledgers. For example, bank’s records of ATM withdrawals or public records of home sales are centralized ledgers. In the cases of centralized ledgers, a single organization takes control of the ledger.
The bank or a government agency maintains a master copy of the ledger without any other official records. On the contrary, blockchain serves as a distributed system working as decentralized ledgers. Distribution implies allocation of multiple copies of the ledger to every party involved in a transaction, thereby decentralizing the control across multiple authorities.
Therefore, all users participating in a blockchain network maintain electronic copies of blockchain data, updated frequently with latest transactions. Users in the blockchain network are known as network nodes, and all of them participate in verification and validation of transactions. Most important of all, there is no specific authority controlling the process.
Cryptocurrency and Bitcoin
Reflection on the next entry in the blockchain vs. cryptocurrency is also essential to find out the differences between blockchain and Bitcoin. Cryptocurrency is a digital variant of money serving as a platform of exchange among a distributed user network. Cryptocurrency transactions are different from conventional banking systems in the tracking through public digital ledger, i.e., the blockchain, and happen directly among participants in the peer-to-peer model without any requirement of intermediaries.
Crypto implies cryptographic techniques for securing economic system and ensuring the development of new cryptocurrency units. Bitcoin is the first known variant of cryptocurrency and is the frontrunner in Bitcoin vs. blockchain debates. The main idea underlying Bitcoin focused on creation of an independent, decentralized, and digital payment system, depending on cryptography and mathematical proof.
Many other variants of cryptocurrencies have emerged recently, each having their specific mechanisms and features. While some cryptocurrencies have their specific blockchain, some alternatives have been built over existing blockchains. On the other hand, some cryptocurrencies discovered their origins completely from scratch.
The next crucial element for understanding the differences between Bitcoin and blockchain refers to applications and real-world use cases. The first point of the blockchain vs. cryptocurrency comparison focused on definitions and conceptual underpinnings for the two entries. Now, it is important to differentiate them on the basis of their uses. Blockchain applications are primarily evident in the facility of a secure, low-cost, and safe environment to facilitate peer-to-peer transactions.
As a result, blockchain technology takes away the need for unwanted intermediaries. Blockchain provides a basis for a distributed ledger that delivers a reliable approach for data storage and access. On the other hand, Bitcoin applications aim at speeding up cross-border transactions with limited control of government over the transactions. Most important of all, it can also ensure simplification of the transactions without any third-party intermediaries.
Real-World Use Cases
In terms of real-world use cases, the Bitcoin vs. blockchain debate finds more clarity. Bitcoin has limitations only to currency trading, and blockchain has many other notable applications. The blockchain technology supporting Bitcoin primarily supports cryptocurrency applications. Therefore, it took some time for people to realize the potential of blockchain technology for application in other areas. Additionally, blockchain technology required modifications for addressing the strict standards and specifications required by businesses.
The guiding principles of tailoring blockchain for businesses emphasized identity over anonymity, assets over cryptocurrency, and selective endorsement in place of proof of work. Some of the notable industries that have benefited from blockchain technology applications are logistics and supply chain management. Another prominent example of real-world use cases of blockchain technology refers to blockchain-based smart contracts.
Now, it is evidently clear that Bitcoin is just a new approach for financial transactions or currency trading, while blockchain is the technology behind it. This also establishes that blockchain technology can also serve as an ideal option for other use cases. Another prominent aspect that solidifies the Bitcoin vs. blockchain debate is the scope of adoption.
On one hand, Bitcoin has a comparatively limited scope, with some governments skeptical about its adoption. On the contrary, blockchain has grown in popularity over the recent years, especially with the launch of many government-backed blockchain initiatives. In the long run, clarity regarding the difference between blockchain and Bitcoin would be crucial for capitalizing on potential of both.