For those new to cryptocurrency, the above two terms can be quite confusing and even misleading. Some people refer to Bitcoin when talking about blockchain technology, while others will refer to blockchain when talking about cryptocurrencies in general. However, these terms are not truly interchangeable: they are separate but interconnected concepts. So, it is important to understand the difference between them. In this article, we will introduce you to the basics of blockchain technology, cryptocurrency, and Bitcoin.
A very basic similarity
Consider the following example:
A website is a technology used to share information.
Search engines are one of the most popular and well-known ways to use website technology.
Google is one of the most popular and famous examples of a search engine.
Tương tự:
Blockchain is a technology used to record information (data blocks).
Cryptocurrencies are one of the most popular and known ways to use blockchain.
Bitcoin is the first and most popular example of cryptocurrency.
Blockchain: Concept
Most blockchains are designed as a distributed and decentralized digital ledger. Simply put, blockchain is a digital ledger, or essentially an electronic version of a paper ledger that records a list of transactions.
More specifically, a blockchain is a linear chain of connected blocks secured by cryptographic proofs. Blockchain technology can also be applied in other areas that do not necessarily involve financial activities. In the context of cryptocurrency, blockchain serves to keep a permanent record of all confirmed transactions.
'Distributed' and 'decentralized' refer to the way the ledger is organized and maintained. To understand the difference, think about common forms of centralized ledgers like public records of home sales, bank ATM withdrawal records, or eBay listings of sold items. In each of the examples given, only one organization controls the ledger: a government agency, a bank, or eBay. Another common factor is that there is only one master copy of the ledger and any other copy is simply a backup and not an official copy. Therefore, traditional ledgers are centralized because they are maintained by a single organization and often rely on a single database.
In contrast, a blockchain is typically built as a distributed system that functions as a decentralized ledger. This means there are multiple copies of the ledger (distributed) and no single entity has sole control (decentralized). Simply put, each user participating in the blockchain network keeps an electronic copy of the blockchain data. Blockchain data is regularly updated with all the latest transactions and synchronized with the user's copy.
In other words, a distributed system is maintained by the collective work of many users around the world. These users are also known as network nodes, and all of these nodes participate in the process of verifying and validating transactions according to the rules of the system. Therefore, power is decentralized (there is no central authority).
Blockchain: Practice
Blockchain gets its name from the way records are organized: a chain of linked blocks. Essentially, a block is a data type that, among other things, contains a list of recent transactions (like a printed page of entries). Blocks, like transactions, are public and visible, but they cannot be altered (like storing each printed page in a sealed glass box). As new blocks are added to the blockchain, a continuous record of linked blocks is formed (like a physical ledger with many pages). This is a simple example to make it easy to visualize, but in reality the process is much more complicated.
One of the main reasons why blockchain is resistant to modification is because blocks are linked and secured by cryptographic proofs. To create new blocks, people in the network need to engage in an expensive and computationally intensive activity called mining. Essentially, miners are responsible for verifying transactions and grouping them into newly created blocks that are then added to the blockchain (if certain conditions are met). They are also responsible for introducing new coins into the system, which are issued as a reward for their work.
Each newly confirmed block is linked to the block immediately before it. The beauty of this setup is that the data in a block cannot be changed once the block is added to the blockchain because it is secured by cryptographic proof. The process of creating a new block is expensive and undoing is extremely difficult.
In short, a blockchain is a linked chain of data blocks arranged in chronological order and secured by cryptographic proofs.
Cryptocurrency
Simply put, cryptocurrency is a form of digital currency used as a medium of exchange within a distributed network of users. Unlike traditional banking systems, these transactions are tracked through a public digital ledger (blockchain) and can be carried out directly between participants (peer-to-peer) without need an intermediary.
'Crypto' refers to cryptographic techniques used to secure economic systems and to ensure that the creation of new cryptocurrency units and the validation of transactions take place smoothly.
While not all cryptocurrencies are mineable, many, like Bitcoin, rely on mining, have a slow growth, and are controlled in circulating supply. Therefore, mining is the only way to create new units of coins and helps avoid the risk of inflation that is a threat to traditional fiat currencies, where the government can control the source. money supply.
Bitcoin
Bitcoin was the first cryptocurrency created, and naturally, one of the most famous. Bitcoin was introduced in 2009 by a developer with the pseudonym Satoshi Nakamoto. The main idea is to create an independent and decentralized electronic payment system based on mathematical and cryptographic proofs.
Despite being the most famous cryptocurrency, Bitcoin is not the only one. There are many other cryptocurrencies, each with its own features and mechanisms. Furthermore, not all cryptocurrencies have their own blockchain. Some are created on top of an already existing blockchain, while others are created entirely from scratch.
Like most cryptocurrencies, Bitcoin has a limited supply, which means that no more Bitcoins will be created by the system after the maximum supply is reached. Although this varies between projects, the maximum Bitcoin supply is set at 21 million coins. Typically, total supply is a public information determined when a cryptocurrency is created.
The Bitcoin protocol is open source and anyone can view or copy the code. The development of the project received contributions from many developers around the world.