As you may have read or heard, Bitcoin is the oldest and most prominent cryptocurrency that uses blockchain technology to facilitate peer-to-peer payments. This virtual currency uses a decentralized network to facilitate low-cost transactions. The use of Bitcoin does not require a central authority such as a bank or a government. Instead, the cryptocurrency uses decentralized public miners and ledgers to function.
Satoshi Nakamoto presented the Bitcoin source code that limits the supply of this virtual currency to 21 million coins. That means the world will not have more than 21 million Bitcoins unless users agree to modify the code. Bitcoin users require a crypto or digital wallet to securely receive, send, and store funds. This wallet is software that users download and install on their personal computers, phones, and equivalent devices.
Miners get new tokens as a reward for their efforts. New Bitcoins enter global circulation on the Bitcoin network. However, you can also accept Bitcoin as payment for a service or good. Another way to get Bitcoins is through trading. Platforms like http://thecryptopunks.com/ allow individuals and organizations to register and start buying Bitcoin with fiat money. Once you have registered and accepted Bitcoins on the said platform, you can transfer them to your crypto wallet.
Bitcoin is not subject to any central government authority such as a banking system or a government. Also, you cannot physically store Bitcoins because it is a virtual currency. The Bitcoin network uses a mathematical algorithm to secure a set of numbers in a public and private key. A public key is compared to a bank account number and a private key is like your ATM PIN.
Bitcoin’s divisibility goes up to eight decimal places, and the smallest unit is called a Satoshi, after the pseudo-founder of Bitcoin.
Blockchain is a digital or computerized payment gateway that facilitates the constant and correct recording of transactions between parties. In simpler terms, a blockchain is a distributed public ledger that constrains a digital asset. Blockchain is the underlying technology of Bitcoin that allows parties to share valuable data, conduct transactions, and pool resources tamper-proof and secure.
Experts promote blockchain as the technology that will revolutionize the world, like the Internet. Although this technology has existed since 1991, it became famous after the arrival of Bitcoin and other cryptocurrencies.
Blockchain is complicated for some people to understand due to its components, which makes regulating it a challenge. These are:
- Blocks – Blocks are fundamental to this technology and contain relevant information about every transaction on the Bitcoin network. Each block comprises a unique hash and a nonce with linear storage. Going back and manipulating or disrupting the blockchain becomes more complex as the chain expands.
- Nodes: Nodes are computers that validate transactions on the blockchain. Since these nodes hold copies of the public ledger, no single entity can own the blockchain. And this prevents privacy breaches while maintaining integrity.
- Miners: Miners create blocks through an incredibly complex process to solve cryptographic or mathematical puzzles.
Bitcoin is a virtual or digital currency. Blockchain is the latest technology that underpins most cryptocurrencies, including Bitcoin. While the blockchain is a public and transparent mechanism, Bitcoin operates under a pseudonym. Blockchain has broader uses, but Bitcoin is restricted to value exchange or investment.