For newcomers to the crypto space, many terms can be confusing and even misleading. Some people talk about blockchain technology when they mean Bitcoin, while others talk about cryptocurrency when they mean blockchain. Although these terms are related, they are not interchangeable. Therefore, here we will introduce you to the basics of blockchain, cryptocurrency, and Bitcoin.

The most basic analogy

Just imagine:

●     Websites are special technologies used to share information.

● Search engines are the most popular and widespread way to use website technology.

●     On the other hand, Google is the most popular and well-known search engine.

same:

● Blockchain is a special technology for recording information (data blocks).

●     Cryptocurrency is the most popular and widespread way to use blockchain technology.

●     Bitcoin, on the other hand, is one of the most popular cryptocurrencies.

Blockchain: The Concept

Most blockchains are designed as a distributed and decentralized digital ledger. Simply put, a blockchain is a digital ledger that records transactions, and can also be compared to a digital version of a paper ledger.

More specifically, blockchain is a linear chain of blocks that are connected and protected by cryptographic credentials. Blockchain technology can be applied to other activities that do not necessarily require financial operations. In the context of cryptocurrency, blocks will be responsible for permanent records of confirmed transactions.

“Distributed” and “decentralized” refer to how the ledger is structured and maintained. To understand the difference, consider some common centralized ledgers in markets, such as public records of home sales, bank records of ATM withdrawals, or eBay sales listings. In each of these cases, only one organization controls the ledger: the government agency, the bank, and eBay. Another common factor is that these ledgers have only one copy of the master ledger, and all others are just backups, not the official record. Therefore, traditional ledgers are centralized because they are maintained by a single entity and usually rely on a single database.

Blockchain is completely different. It is usually built as a distributed system and serves as a decentralized ledger. This means that there is no single copy of the ledger (distributed) and it is not controlled by a single individual (decentralized). Simply put, every user who decides to join and participate in the maintenance of the blockchain network will have a copy of the blockchain data, which will usually be synchronized with other users' copies, and all the latest transaction data will also be updated to the copy.

In other words, a distributed system is maintained by users working together all over the world. These network users are called nodes, and these nodes will verify and confirm transactions according to the system rules. Therefore, power becomes decentralized (there is no central authority).

Blockchain: Principles

The blockchain gets its name from the way it organizes records: a linear chain of linked blocks. Essentially, a block is a piece of data that contains a list of recent transactions (like a printed record). The blocks and transactions are publicly visible, but cannot be changed (like each page of the record is stored in a glass box). As new blocks are added to the blockchain, the linked blocks form a continuous record (just like a physical ledger with many pages of records). This is a very simple analogy, but the process is much more complicated than this.

The main reason why blockchain is difficult to tamper with is that all blocks are linked to each other and protected by cryptographic certificates. In order to produce new blocks, participants in the network need to carry out expensive and intensive computing activities, a process called mining. The job of miners is to verify transactions and group them into newly generated blocks, which are then added to the blockchain (if the conditions are met). Miners will also be responsible for introducing new tokens into the system, which are those issued as rewards for work.

Each confirmed block is linked to the previous block. The beauty of this is that once a new block is added to the blockchain, the data in the block cannot be changed because the data in the block is protected by cryptographic certificates, which are expensive to produce and difficult to revoke.

In summary, blockchain is a chain of interconnected data blocks, and the blocks will be linked in chronological order and protected by cryptographic certificates.

Cryptocurrency

Simply put, cryptocurrency is a digital form of currency that serves as a medium for users to exchange funds in a distributed network. Unlike the traditional banking system, cryptocurrency transactions can be tracked through a public digital ledger (blockchain) and can occur directly between the two participants (P2P) without the need for any intermediaries.

"Crypto" refers to encryption technologies that can ensure the security of economic systems, maintain the creation of new cryptocurrencies, and ensure smooth transaction verification.

Not all cryptocurrencies are mineable, but most, like Bitcoin, rely on the mining process to have a slowly and controlled growth in circulating supply. Therefore, mining is the only way to create new units of cryptocurrency, which avoids the inflation risk seen in traditional fiat currencies.

Bitcoin

Bitcoin is not only the world's first cryptocurrency, but also the most well-known cryptocurrency in the market. In 2009, a developer or a group of developers with the pseudonym Satoshi Nakamoto created Bitcoin. The main idea behind the creation of Bitcoin was to build an independent and decentralized electronic payment system based on digital proof and cryptography.

Although Bitcoin is the most well-known, it is not the only one. There are many other cryptocurrencies in the market, and each of them has its own unique properties and mechanisms. In addition, not all cryptocurrencies have their own blockchain. Some cryptocurrencies are created on top of existing blockchains, while others are created step by step from scratch.

Like most cryptocurrencies, Bitcoin has a limited supply, which means that no new tokens will be generated in the system after the maximum supply is reached. The maximum supply of Bitcoin is 21 million. Usually, the total supply of a cryptocurrency is announced after it is created.

Because the Bitcoin protocol is open source, anyone can view or copy its code, and numerous developers around the world contribute to the development of the project.