As you may have read or heard, Bitcoin is the oldest and most prominent cryptocurrency that uses blockchain technology to facilitate peer-to-peer payments. This virtual currency uses a decentralized network to facilitate low-cost transactions. Using Bitcoin doesn’t require a central authority like a bank or a government. Instead, the cryptocurrency uses decentralized public ledgers and miners to function.
Satoshi Nakamoto introduced the Bitcoin source code that caps this virtual currency’s supply at 21 million coins. That means the world won’t have more than 21 million Bitcoins unless users agree to alter the code. Bitcoin users require a crypto or digital wallet to receive securely, send, and store funds. This wallet is software that users download and install on their personal computers, phones, and equivalent devices.
Miners get new tokens as a reward for their efforts. The new Bitcoins enter the global circulation in the Bitcoin network. However, you can also accept Bitcoin as a payment for a service or a good. Another way to get Bitcoins is via trading. Platforms like http://thecryptopunks.com/ allow individuals and organizations to register and start buying Bitcoin with fiat money. Once you’ve registered and accepted Bitcoins on such a platform, you can transfer them to your crypto wallet.
Bitcoin is not subject to any central governing authority like a banking system or government. Also, you can’t store Bitcoins physically because it’s a virtual currency. The Bitcoin network employs a mathematical algorithm to secure a set of numbers in a private and public key. A public key compares to a bank account number, and a private key is like your ATM pin.
Bitcoin divisibility goes up to eight decimal places, and the smallest unit is called a Satoshi, named after Bitcoin’s pseudo founder.
Blockchain is a digital or computerized payment gateway that facilitates constant and correct recording of transactions between parties. In simpler terms, a blockchain is a public, distributed ledger that restricts a digital asset. Blockchain is Bitcoin’s underlying technology that enables parties to share valuable data, transact, and pool resources tamperproof and secure.
Experts tout blockchain as the technology that will revolutionize the world, like the internet. While this technology has existed since 1991, it became famous following the advent of Bitcoin and other cryptocurrencies.
Blockchain is complicated for some people to understand because of its components, making regulating it challenging. These are:
- Blocks: Blocks are central to this technology, and they contain relevant information about every transaction in the Bitcoin network. Every block comprises a unique hash and nonce with linear storage. Going back to and manipulating or disrupting the chain of blocks becomes more complex as the chain expands.
- Nodes: Nodes are computers that validate transactions in the blockchain. Since these nodes have copies of the public ledger, no single entity can own the blockchain. And this prevents privacy breaches while maintaining integrity.
- Miners: Miners create blocks via an incredibly complex process of solving cryptographic or mathematical puzzles.
Bitcoin is a virtual or digital currency. Blockchain is the latest technology that underpins most cryptocurrencies, including Bitcoin. While blockchain is a public, transparent mechanism, Bitcoin operates pseudonymously. Blockchain has more extensive uses, but Bitcoin is restricted to value exchange or investing.
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