Bitcoins opened the floodgate for the popularity of cryptocurrency the world is experiencing today. Within the decade, cryptocurrencies such as Bitcoin consistently and constantly make the news negatively and positively.
Blockchain technology is a fascinating prospect and one that is developing and evolving rapidly. It first started as the technology upon which Blockchain was based but has become more than that.
Many people are still unsure what Bitcoin, cryptocurrency, and Blockchain are. This article will help you make sense of these three concepts, starting with their definition and how they work.
Bitcoin, Cryptocurrency, and Blockchain: Definitions
Starting with the basics of understanding what cryptocurrency, Blockchain, and bitcoin mean can help you make better sense of them. Bitcoin is the first and most popular cryptocurrency in circulation and has the highest value.
Although the tech world has discovered (and is still discovering) its full potential, blockchain technology initially existed for Bitcoin. A decentralized ledger enables the existence of cryptocurrency through which all transactions occur.
Participants on the blockchain network can confirm their transactions without requiring a central clearing authority. The decentralization of Blockchain also means they can carry out transactions without needing the input of a third party or central authority like you get when you use crypto to play on https://parimatch.in/en/dota-2-international.
Meanwhile, cryptocurrency or digital currency is a medium of exchange like pounds and dollars. The difference is that cryptocurrency is digital and controls how monetary units are created and verifies how they are transferred through encryption techniques.
The Potential of Blockchain Beyond Cryptocurrency
Blockchain has many unique and outstanding characteristics that other industries find useful. Business-wise, it would be safe to say blockchain technology is a type of next-generation software for business process improvement.
It is collaborative technology with a proven potential to improve the process of networking and operation between companies. In addition, it lowers the cost of trust, which ensures significantly higher returns for every fund invested than conventional internal investments.
Blockchain ensures secure, transparent, and safe transactions, thus proffering solutions to the major problems of different industries. Apart from creating cryptocurrencies, below are other ways companies and people are now using Blockchain:
- FinTech startups and financial institutions are using Blockchain to settle money transfers and process payments faster, more securely, and efficiently.
- Organizations are utilizing Blockchain to keep records safe, confidential, and unalterable; healthcare uses it to store confidential medical records.
- People also use Blockchain to create smart contracts to guarantee certainty and eliminate the need for a middleman.
- Blockchain technology records and recalls data within a supply chain, thus helping companies track important records easily.
Understanding Blockchain Operations: How Does It Work?
Blockchain, as the name implies, consists of a chain of blocks where data, a cryptographic hash, and the previous block’s hash are stored. The hash is the block’s fingerprint and a unique identifier relating it to the elements contained in it.
That means the cryptographic hash will change if the data within the block changes. Meanwhile, one block carrying the hash of the block before it means that if someone tampers with a block, the next one becomes invalid.
The unique identifiers of blocks in the Blockchain ensure safety and solidify trust while adding extra layers of security. Unfortunately, one of the security layers they add is proof-of-work, making it hard to create new blocks.
If an intruder tampers with a block, they will need to review subsequent blocks to recalculate their proof-of-work; that takes time and energy. There’s also something called P2P (peer-to-peer) in Blockchain; it means the blockchain ledger is distributed among several users.
Blockchain isn’t regulated, owned, or supervised by one entity; every user on the network owns a full copy. Each user (also known as a “node”) receives every new block of data added to the Blockchain. By creating a consensus, P2P enables users or nodes in the Blockchain to verify and validate data.
How Does Bitcoin, Cryptocurrency Work?
Cryptocurrency uses and records transactional data in blocks of data with unique identifiers on the Blockchain. For example, if a user has 100 Bitcoins, they will store them in a digital wallet with a public and private key.
This key is private and crucial to all their digital assets; losing it will mean losing everything. Furthermore, the public and private keys are linked, which enables the user to send and receive funds.
Let’s say the user wants to buy ten Bitcoins from a vendor. First, they will transfer the cost of the ten Bitcoins from their digital wallet to the vendor with the public key for identification. Then, they’ll digitally sign the transaction with their private key, after which the transaction is recorded and transferred to a wider network.
The network verifies the transaction to ensure its legitimacy and that the user has enough funds. The transaction is confirmed when it is added to the next block of the Blockchain along with several others.
This simple explanation gives you a good idea of what Bitcoin, cryptocurrency, and Blockchain are all about. All three concepts are entities of one large subject: blockchain technology, a concept still in its infancy. Tech giants are still exploring Blockchain technology; the massive potential we’re experiencing is only the beginning.