In today’s world, hearing/reading the words “blockchain” and “bitcoin” more than three times a day is quite a common experience.
However, most people who are not in the cryptocurrency space use both terms interchangeably when they mean very different things.
The blockchain is the technology that powers Bitcoin (and other cryptocurrencies). It is responsible for the creation of most virtual currencies.
Think of it like an orange tree and its fruits. Without the tree, the fruits cannot be produced. The fruits are the most popular by-product of the tree, but other parts like the leaves and stems are also equally useful. However, the fruit takes all the shine.
If you wouldn’t call an orange fruit an orange tree and vice versa, you shouldn’t use Bitcoin and blockchain interchangeably.
What is the blockchain?
If you hear the word “blockchain” and imagine a couple of blocks tied together with a heavy metal chain, then you’re not too far from the truth.
The blockchain is basically a computer file that contains an endless and unlimited connection of “blocks.”
A block in this context is a public record of transactions (a ledger) aggregated into batches.
Think of it like building a multiple storey house like a skyscraper. After stacking cement block after cement block, you get the height of one storey.
When you get the desired height, you then “deck” the floor and set the precedence for the next storey, which you will build on top of the just-completed one.
In the blockchain, that first storey is the block, and the decking which separates and connects the first storey from the second is the chain.
Together, both stories are the blockchain. As you build more storeys, the blockchain continues to grow until infinity.
You can also think of it as a page in a physical ledger book. When you sum up all the transactions recorded in a ledger for one day, it makes up the daily transactions for that day.
A block is like the daily pages of the ledger, and the blockchain is the entire ledger book, each page connected to the other.
Once a page is full, it closes up, gets recorded as a block and connects to the long chain of previously filled blocks. A new block automatically opens to continue the process.
Simply put, the blockchain is a continuously growing list of data records available in small batches that are organised in chronological order, held together by computer algorithms, publicly available on the internet, and managed by a network of individual computers called nodes.
In 2020, there were about 861 blockchains, according to BitDegree. But we reckon there are now over a thousand different blockchains with their peculiar characteristics and features.
What is Bitcoin?
Bitcoin is a cryptocurrency (digital currency) created and held on the blockchain.
A cryptocurrency is a type of money that is completely virtual. It is basically online cash. As of today, there are over a million cryptocurrencies.
Bitcoin is just the first and most popular cryptocurrency. It was created in 2009 by an anonymous engineer with the alias Satoshi Nakamoto.
Bitcoin is obtained as a reward for creating blocks in the Bitcoin blockchain. The process of creating these blocks is called mining.
Mining is a tedious process that varies depending on blockchain technology. Bitcoin mining involves solving complex mathematical problems in the blockchain, hoping that you would be randomly picked and rewarded with Bitcoin.
While Bitcoin can only be used to store and transfer financial value, the blockchain can be applied in many ways, including record keeping, managing logistics and supply chains, and aiding transparent elections/voting.
The blockchain can be used to transfer value but not just financial value. It can also be used to transfer ownership and property rights.
As a crypto beginner, it is important to learn the difference between terms. We’re sure that after this, you won’t use Bitcoin and blockchain interchangeably anymore.
You can check out our other explainers to learn more about the amazing world of blockchain.
