The Bitcoin-Blockchain Relationship Explained for Newbies In A Nutshell

In a nutshell: To understand what Blockchain is, think of a traditional accounting book, or ledger, where records of transactions are kept and assets are tracked. However, the difference with Blockchain’s ledger is that it is shared and available to all parties. This is revolutionary, because it provides tighter security and will save time and costs.

The Picture Today: For thousands of years, trade, money and systems of credit have existed to facilitate exchanges. Globally, modern transaction volumes are growing exponentially. The growth of mobility of people around the world, ecommerce, online banking, and in-app purchases are just a few examples of the fuel that is being added to the fire of modern day transactions. While technology such as credit cards and the internet have improved the facilitation of transactions, the reality is that many business transactions remain inefficient, costly, and vulnerable.

Such issues include :

  • Cash is limited in certain amounts and is mostly used locally.
  • Transaction settlements can take a long time and international transactions may be complicated.
  • The need for third party intermediaries add to inefficiencies and sometimes require a duplication of the validity.
  • Cyberattacks and fraud pose risk to even the biggest banking systems and add to business complications.
  • Merchants must pay credit card organizations the high costs of onboarding which is also time-consuming and paperwork intensive More than half of the people in the world do not have access to a bank account.

This also means that its complexities, inefficiencies, costs, and vulnerabilities will also grow significantly.

What is Needed: To address these issues, the world needs a payment network that does not charge monthly fees, is fast, and can establish trust through a collective bookkeeping solution to ensure transparency.

Bitcoin in Relation to Blockchain: Bitcoin is a digital currency that was launched in 2009 by an unknown person who goes by the pseudonym Satoshi Nakamoto. Bitcoin has no central monetary authority, meaning that no government, corporation, or single person controls it. globally, transaction volumes are growing exponentially. With printed currency, a central monetary authority exists to manage the money supply, such as monitor, verify, and approve transactions. With Bitcoin, coins are “mined” by people using computers all around the world by solving mathematical puzzles. This makes bitcoin a “peer-to-peer computer network made up of its users’ machines.”

Blockchain serves as Bitcoin’s shared ledger. It delivers the means for recording Bitcoin transactions through the shared ledger. An easier way to think of the two would be to imagine Blockchain as an operating system, such as iOS for the iPhone. On that operating system, many applications can be made, and similarly, Bitcoin is one of many applications that can be made with Blockchain. There are many more uses for Blockchain than just digital currency. Bitcoin is the first use for it.

Some Advantages to Bitcoin:

  • Cost-effective: Bitcoin eliminates the middleman. In certain cases, it is cost-effective, such as sending transactions across borders
  • Transparent: Transaction information is recorded one time and accessible to all parties through the distributed network
  • Immutable: Once a transaction has occurred, it cannot be changed, only reversed with another transaction. Both transactions would appear on the ledger.

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