Blockchain and Bitcoin – Are They Different?
One of the questions that come up a lot is “Are blockchain and Bitcoin the same?”
If you've ever wondered if there is a difference you're not alone.
As over the last eight years or so since Bitcoin was launched, Blockchain and Bitcoin have constantly been mentioned in the same breath together.
There are fundamental differences between Blockchain and Bitcoin that you need to know before you consider investing.
This article will demonstrate how Blockchain is not Bitcoin, how Blockchain is a technology that has uses other than cryptocurrency, and why in fact Blockchain might even outlive Bitcoin.
Blockchain and Bitcoin Fundamentals
Blockchain is not Bitcoin – The difference between Blockchain and Bitcoin is that Blockchain is the technology that underpins the digital currency that is Bitcoin and makes the existence of Bitcoin even possible.
Blockchain is a public ledger or distributed database technology that records every single Bitcoin exchange transaction ever carried out over the network by participating parties.
This occurs when transactions are completed and approved to be legitimate transactions by the computers who are the administrators of the network.
Upon validation, the transactions are bundled into blocks to be added to the Blockchain.
Once a new chain is added to the block, it’s encrypted using cryptography and can’t be changed, replicated or removed.
The transaction details are then permanently added to the Blockchain forever.
Information that is stored on the Blockchain can literally be anything.
Bitcoin, on the other hand, is a form of massively unregulated digital currency that was launched back in 2009 by a developer called Satoshi Nakamoto.
Nakamoto launched Bitcoin as a means of creating a digital currency that was transparent, efficient and free from any government/central bank currency controls.
All while keeping a public record of all transactions that occurred over the network.
However, he couldn’t accomplish all this with just Bitcoin.
He needed a technology (or payment system) to make and record the transactions for everyone to see.
And that technology happened to be blockchain.
And so the Bitcoin blockchain was born.
Bitcoin was the very first ever blockchain and the only blockchain until the Ethereum blockchain was created in 2013.
As a result, Bitcoin remains the most widely known cryptocurrency, which has meant that Blockchain and Bitcoin have grown up to be twins of sorts.
However, Bitcoin is to Blockchain as to what emails are to the Internet.
Bitcoin simply makes use of the technology that underpins it.
As they were largely born together and raised together – outsiders have found it hard to tell them apart.
In a nutshell, Blockchain is the record keeping system that records the movement (ownership) of transactions of digital coins like Bitcoin possible, whereas Bitcoin is just that – a digital coin.
Can Blockchain Work Without Cryptocurrency?
This has been a burning question for many people, and one of the main reasons why people find it hard to distinguish between Blockchain and Bitcoin.
This is because the first ever Blockchain was made to support Bitcoin.
In other words, it was designed especially for cryptocurrency.
But can Blockchain work without cryptocurrency?
A Blockchain without cryptocurrency is basically a token-free shared ledger or public recordkeeping system, and the real question is whether or not there is value in this.
The answer? It’s hard to say.
But what is true is that Blockchain can be used for assets other than mere cryptocurrency.
These assets include securities, private equity, bonds, food products, real estate and cars.
Blockchains are perfect for recording information
Take Everledger which is a luxury goods firm that has already started using Blockchain to reduce double financing, document tampering and fraud.
Thanks to Everledger, more than 1,000,000 diamonds are safe on the Blockchain with the details of the owners permanently recorded on the Blockchain.
Everledger is a strong example of the Blockchain potential to minimise theft and fraud, it can be used for more supply chains across the pharmaceutical, agriculture, retail and any other sector you can think of.
This is because Blockchain improves assurance of the quality of a supply chain.
The reason why an industry might need this assurance will vary from industry to industry, but the fact is that Blockchain can create a level of trust that might be missing at the moment in some sectors.
The Future of Blockchain and Bitcoin
Let’s face it – Bitcoin has been mega-hyped up.
It’s been on the news, there’s always dudes on your Facebook posing photos with a Lamborghini while talking about his Bitcoin gains, and even your mom has added it to her everyday lexicon.
At the end of 2017, Forbes posted an article titled “Why Blockchain Is Real and Bitcoin Is A Mirage.”
The article couldn’t have been timed any more provocatively.
In December 2017, the price of a single Bitcoin had rocketed to $20,000 and had more overall value than Disney’s market cap.
Bitcoin mania was well and truly in full swing.
But for all those who were buying Bitcoin and seemingly getting very rich off it, there were just as many – if not more – detractors and skeptics who said that the wheels would soon fall off the Bitcoin wagon.
It was a hyped up bubble that would burst, leaving many investors in tears.
As the Forbes article points out, “For it to be real money, Bitcoin must be a viable and stable source of value.
Bitcoin is a poor store of value because of its extreme volatility.
Bitcoin’s price is characterized by wild swings, both up and down, with the potential to move more than 20% in a single day.”
At the time of writing (May 2018), one Bitcoin is worth $8,130.
That’s still a lot of money but it’s considerably less than it was worth five months ago.
This is all down to the fact that Bitcoin is super speculative.
Blockchain, on the other hand?
It can be easy to dismiss Blockchain as a fad, too.
Especially when you read about small tech companies like On-Line PLC changing their name to On-Line Blockchain PLC, before seeing their share price rise a whopping 394% over the next 24 hours.
All it took was for investors to see the word “Blockchain” and they were triggered. They literally threw money at these companies for simply changing their name.
This sort of hype can make sensible investors wary.
However, we believe it is well worth listening to the experts on this one.
Yes, Blockchain is surrounded by hype, but if Harvard Business Review thinks it’s got the potential to be a world changer, you know you should be listening.
Here’s what they said:
“Blockchain is not a ‘disruptive’ technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly.
Blockchain is a foundational technology. It has the potential to create new foundations for our economic and social systems.”
Blockchain has an exciting future.
However, the problem is that Blockchain has still not produced that superstar app we’ve all been waiting for.
Its technology means it can create permanent and transparent records but at the same time not all of us like the idea of permanent records that can never be erased.
It’s been mooted that Blockchain can have a huge impact on advertising, economics and democracy, but so far we haven’t seen evidence of much.
That said, history tells us to be patient.
The Internet started life back in the 1960s but your parents weren’t hooked up to the world wide web until the 1990s.
The truth is with Blockchain we are still probably waiting for the Googles and the Facebooks of the cryptocurrency world to be born.
One may even be as bold as to suggest that Bitcoin is akin to AOL and Myspace.
But who really knows?
But what about Bitcoin’s future?
Twitter CEO Jack Dorsey threw his weight behind its potential as the currency of the future in May 2018.
Dorsey says “that he hopes Bitcoin will be the Internet’s native currency, having previously said that he would “love to see a digital currency thrive.” Moreover, his company Square began accepting payments in Bitcoin before it was even a thing.
But for every fan of the digital coin, there are just as many skeptics.
It’s impossible to overlook the fact that Bitcoin is insanely volatile and the transfer times a little slow (although faster than sending money internationally).
At the same time, due to its numerous advantages, it’s hard to see Bitcoin going away any time soon.
We here at ecommerceguider, personally think that if you believe in Blockchain technology and cryptocurrencies then Bitcoin is a great investment.
Now you might be wondering why?
Firstly, we think Bitcoin has great brand value.
Just about every man and his dog knows about Bitcoin.
This is not to mention the fact that every single exchange lists Bitcoin. Bitcoin has a huge first mover advantage.
Similarly, when the institutional money starts pouring into cryptocurrency every cryptocurrency investor is going to want to hold some Bitcoin which will cause the price to skyrocket.
These are just some of the reasons why we think every investor should hold a little Bitcoin.
Want to get started buying Bitcoin today?
If you're new to Bitcoin and want the easiest, quickest and most convenient way to purchase Bitcoin we recommend using Coinbase.