Are Blockchain and Bitcoin Same, if Not What is the Difference?
Although Bitcoin and Blockchain terminology is frequently used together we need to understand that they are actually separate concepts.
Blockchain is the technology that enables transfer of asset or value, in case of Bitcoin the transferred asset/value is the digital money.
Once we put the definition of Blockchain as “asset/value transferring technology”, it becomes natural to think that we can make many other applications other than money transfer hence the difference between Bitcoin and Blockchain becomes more clear.
In other words, Bitcoin is the most well known application of Blockchain technology for now but Blockchain technology has the potential of changing the nature of current way of asset/value transfer. Therefore it should be thought as a technology or platform while Bitcoin should be thought as one application of this technology.
Blockchain can have as great potential for transfer of value as internet did for transfer of information therefore many technology enthusiast have high expectations from the Blockchain technology, so no wonder why it became more than a hype in startup, technology, venture capital and banking circles.
Then the question is what kind of revolution the Blockchain technology brings to life, how it works. In order to be able to transfer asset/value thru digital or physical environments you need to make sure the same value can not be transferred more than once which is referred to as Double Spending Problem.
Current technology solves double spending problem thru trusted middle men, however since Blockchain is a peer to peer technology there is no middle men, then we even become more curious, how it works?
Blockchain technology solves the problem of double spending thru distributed open ledger and cryptography.
Distributed Open Ledger means;
1. There is no central authority but a network of many individual computers,
2. All transactions are listed in encrypted fashion in a chain of transactions,
3. This chain of transactions can be seen by anyone in the network,
4. Each transaction is chained thru cryptography to its predecessor
How the Blockchain works in case of Bitcoin application;
1. When one wants to transfer Bitcoin, the transaction is published as unvalidated transaction to the network,
2. The so called miners starts the race of processing money transfer thru first; Validating the transaction using the open ledger history. This means the miners try to understand if the person who wants to send money actually has the money.
3. Miners secondly Solves the puzzle to find the key to lock the transaction to chain of all previous transactions, this is necessary to eliminate the double spending, once a transaction is locked to chain it becomes almost impossible to change the content of the transaction,
4. Miners are rewarded with Bitcoin for their efforts,
5. Once the transaction is Validated and Locked to chain, the miner publish it to everyone,
6. Validated and Locked transaction is seen by all in the network and added to their copy of the ledger because it makes no sense to try to solve the same puzzle or not to update the own copy of the ledger.
Of course there is the technical details of how this cryptography, synchronizations, mining concept and chain works but I am not an expert on these and trust someone else can explain it better than I can.
The point is, with blockchain technology it is already proved that the following benefits can be realized;
1. Blockchain technology eliminates middleman in money/value/asset transfer
2. Blockchain technology reduces the cost of money/value/asset transfer
3. Blockchain technology reduces the time to transfer money/value/asset
4. Blockchain technology is more secure than any other available technology
Needless to say every single one of the benefits above is revolutionary and yet the Blockchain achieves them all together. So I guess those who keep talking about how revolutionary the Blockchain technology is have a point.