Did you know that “blockchain” and “Bitcoin” are not synonymous? You’re not alone if you’ve been using the phrases indiscriminately; many people do, owing to the strong correlation between Blockchain and Bitcoin. However, in reality, these two are very unlike each other and have captured the world in very different ways without most even having realised it.
When we look at Bitcoin and its offers, it is clear that it has various benefits, including; teaching people about capitalism, making better investments and how cryptocurrency works, which can potentially be much more than Blockchain. Keep reading to find out how.
First, let’s clear it up once and for all. What is the difference between Bitcoin and Blockchain?
To explain in straightforward terms, Blockchain is the technology that makes up Bitcoin. Bitcoin is more of an application of Blockchain in finance.
The term “blockchain” refers to a collection of time-stamped “blocks” holding digital data that are maintained in an open repository utilising cryptographic rules (or “chain”). This digital data comprises three parts:
- transactional data
- data about the transaction’s user
- unique details (hash) that differentiate each block from the others
A group of computers run independently and spread worldwide, called “miners”, verify each of this information before they are added to the chain, making it much more trustworthy than all centrally controlled regular transactions. Each such transaction is visible to all the members associated with the particular blockchain development and can be traced back to its original owner at any time with complete accuracy. So there can never be doubt regarding the authenticity of any information over a blockchain. Every member’s public information is obfuscated under long and complicated code that can only be decrypted by the specific user, making the data almost entirely hacker-proof.
On the other hand, Bitcoin is a cryptocurrency, i.e., it is a digital/virtual currency that can be used to buy and sell products and services and manage payments over a secure peer-to-peer network in a digital process. Unlike traditional fiat money transfer systems, Bitcoin is decentralised, meaning it doesn’t require permission from a central authority like banks or governments for monetary transactions. Anyone in the world can send digital properties like digital contracts, digital signatures, digital keys (passwords or other virtual keys), digital ownership to assets, digital stocks and bonds, and much more to anyone else.
The Byzantine General’s Problem has befuddled computer scientists for a long time. It raised the very reasonable question of how to build trust between strangers over an untrustworthy channel such as the Internet. This blockchain application was the first honest answer to the challenge.
What’s so special about Bitcoin?
This practical use case of Blockchain in finance has several features that get everyone, tech-savvy or not, get hooked on it like crazy –
- Every Bitcoin activity is recorded on the Blockchain, analogous to a bank’s register or log of clients’ funds entering and exiting the bank. As said earlier, each of these transactions is validated by a group of miners situated worldwide to ensure no fraudulent transaction can occur.
- Once a block of information is added to a blockchain, not only can it never be altered, but it can also never be lost. So every Bitcoin transaction ever made is safely preserved on its blockchain ledger, and even information from years ago can be easily accessed.
- Only 21 million bitcoins will exist, so Bitcoin cannot be inflated or manipulated.
- You don’t even have to buy a whole Bitcoin to start investing in this particular application of blockchain technology in finance. You can simply buy a fraction of it and perform all the transactions with little to no fees.
All these make Bitcoin inclusive of every kind of investor – ordinary people with limited funds, people who cannot produce all the paperwork the centrally run organisations need for a loan or permission to invest, and much more. No wonder this blockchain application is honestly shaking up the financial world.
Why does Bitcoin matter more than Blockchain?
Bitcoin matters more than Blockchain technology for a variety of reasons.
- An alternative to traditional financial institutions:
Bitcoin is putting the banks and accounting systems to bed and creating a virtual world in which buying, selling, and every other fiscal activity can be performed without the influence and control of the government and banks. This application of Blockchain in finance is changing the face of banking altogether.
- Valuable investment:
Bitcoin has one up when it comes to investments – even more than any other centralised or decentralised investments, even the blockchain ones. Since there will ever be only 21 million Bitcoin in circulation, it will always maintain its scarcity, preserving its worth in financial markets forever, meaning Bitcoin can set people up for life financially, unlike other blockchain applications. People who may be financially struggling will always have the Bitcoin backup to fall on whenever they need it. Its value may fluctuate, but it’ll never be zero even if the stock market crashes and there are substantial financial crises like the world has been going through for a while now.
For example, as shown in the graph below, even after a massive disaster like COVID hit the world in 2020, or the Russia-Ukraine war in 2022, Bitcoin still managed to maintain its price near $30k when every other market completely collapsed.
There is a long list of blockchain applications apart from Bitcoin, which are all very important. However, when it comes to popularity, Bitcoin wins. So far, it has been able to gauge a wider audience and more businesses than any other blockchain application in finance.
- High return potential:
Bitcoin wins over all other blockchain applications in its return potential. The market of Bitcoin is very volatile. While some may view this as a negative side, many think it is the exact opposite. For instance, in March 2017, Bitcoin was valued at $975.70, yet in December of the same year, it rose to $20,089. Three years later, in April 2021, it spiked to an all-time high of $64,000. Plus, as Bitcoin gets more popular and more big names to invest in it (like Microsoft and Tesla), its value will only soar high, which will be a massive upside for the ones that bought it at a lower price. So, if one keeps up with the latest trends of Bitcoin, there always is a huge earning potential associated with its investment.
Considering Blockchain and Bitcoin are so intimately connected, it took a while for people to comprehend that Blockchain can be used for much more than financial exchanges. If you have been following the financial news since the beginning of 2020, you must know how many blockchain applications are already taking over the world – decentralised finance, NFTs, and now the Metaverse – all of which show immense promise to change the world as we know it forever. Yet, whether it’s better than Blockchain or not, Bitcoin will remain at the top of worthiness and popularity and will be a constant in the world of investments, most likely, forever.
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