Are blockchain and bitcoin the same thing?
What is the difference between bitcoin and blockchain? Everyone has probably heard about bitcoin at least once by now. Some people know how it made a bunch of people rich through an investment. Others know that bitcoin is a form of blockchain. And some people believe blockchain technology is the future of the internet. What do you know? Do you have a clear visualization in mind of what all these terms are about? Let me provide you with a brief overview based on what blockchain is and what bitcoin entails.
A blockchain is a chain of blocks that contain information. At the moment, blockchain is considered to be a solution for the flaws of the internet as we know it now. It offers solutions to problems such as fraud, hacking, trust, transparency, privacy and data sovereignty. In 2020, we live online. We’re on the edge of being able to put our minds on the cloud. But honestly, haven’t we already?
What was your average screen time this week? On average we spent 3 hours and 15 minutes on our phone per day. A quick calculation, that is 10 years of your life. I bet you can think of a million other things that you would rather spend that time on. Especially since chances are quite high that you will waste that time on TikTok, Instagram, Youtube or another addictive platform. But don’t feel guilty, my screen time is also not something I am proud of.
The reason I am telling you this is because all this time you spend online you put data into gigantic computers. Jaron Lanier, computer philosophy writer and computer scientist, calls these computers ‘siren servers’. These computers are owned by large companies who convince their users to give up data in exchange for the free use of their services, think of Google and Facebook. There is no power distribution, all the power is in the hands of one party and subsequently of one person, for example, Mark Zuckerberg.
The blockchain provides the opposite, no one has control over the service. Yet it is powered by computers spread all over the world. Anyone can power the system with a computer. All information and transactions on the blockchain are verified by every other computers and collected in a distributed database.
Everything that happens on the blockchain is visible for everyone to see. I know what you are thinking: “but blockchain was supposed to be private.” Well, it is. All the information is secured by asymmetric cryptography. In easy words, the information is visible to users in unique codes and is considered trustworthy because the system has verified it, not a human or organization. The code does not show who the person behind it actually is, but the system makes sure you can trust them.
Once something is verified on the blockchain, it becomes unmodifiable. Let’s start at the beginning with an example. John buys a pen on the blockchain. This information is collected by the computers on the system (on the blockchain these computers are called nodes, but let’s stick with computers for now). At the same time, the computers try to form a code to create a new block for the blockchain. This is done by solving complicated and difficult cryptographic problems, kind of like very, very hard puzzles. Once the new block can be formed and John’s transaction is checked, the information is verified by all other computers on the network and is stored on the blockchain.
The block now has a unique code of its own. But in order to connect it to the chain, it also contains the code of the previous block. This way every block is connected to the one before. It makes it almost impossible to change information that was once stored in a block. If someone changes the information of one block, the code of that block will change. Consequently, all the next blocks will be invalid.
This is already a lot of information to process on what blockchain is and how it works. Unfortunately for you, this is only the top of the notch of what blockchain entails and what it can do. This is why the difference between bitcoin and blockchain is so important. Bitcoin was the first blockchain that started the blockchain revolution.
The bitcoin started with a whitepaper released back in 2008 by Satoshi Nakamoto, proposing the idea behind bitcoin. However, it is still unclear who Satoshi Nakamoto is. Satoshi Nakamoto is a pseudonymous, in other words, a fictitious name. Nevertheless, bitcoin was founded and is working very well. The idea behind bitcoin as explained in the whitepaper is to have an online payment system that doesn’t need an intermediary such as a bank.
So what bitcoin is, is just a new currency like the euro and dollar, but it only exists online. More and more companies start to allow people to pay with bitcoin and the latest big new comes from PayPal who is going to create a cryptocurrency wallet. Making bitcoin and some other altcoins easier and more available to the public.
Altcoin means an alternative coin, and even more specific, an alternative coin to bitcoin. All the new bitcoins have their own chain of blocks and contain their own information. The new altcoins are not only currencies but are becoming much more than that. Famous other cryptocurrencies, for example, are Ethereum and Chainlink which are not currencies but networks that each have their own capabilities and applications which get very complicated again.
Bitcoin (and Ethereum and Chainlink) are forms of blockchains. Blockchain is the idea behind cryptocurrencies. When you would want to create your own altcoin you would have to understand how blockchain works and you can take bitcoin as an example as it was the first blockchain that got serious attention. Whether bitcoin will stay the biggest cryptocurrency out there is questionable since the new altcoin are much more advanced and offer lots of possibilities which bitcoin can never do. Because once a blockchain is created, it can never be changed again.