The blockchain technology is disrupting many industries. However, many people only know of Bitcoin as the only use case of blockchain technology. In fact, some people equate blockchain to Bitcoin, which is not accurate. In brief, blockchain is the underlying technology that powers a myriad of cryptocurrencies, and Bitcoin is just one of them. Other cryptocurrencies that run on blockchain include Ethereum, Litecoin, Z-cash, Dash, Ripple, and more than 1,600 other less known cryptocurrencies.
Blockchain is a distributed ledger system that allows users to store data in an immutable form. Bitcoin, on the other hand, is a cryptocurrency that is built upon the blockchain infrastructure.
How Blockchain Powers Bitcoin?
Bitcoin is the pioneering cryptocurrency, and that is the reason behind its popularity. Satoshi Nakamoto created Bitcoin in 2009 with the aim of establishing an independent, decentralized electronic payment system. Bitcoin is based on cryptography and mathematical proofs. Other than Bitcoin, there are multiple other cryptocurrencies that run on blockchain technology. However, some of them don’t have their own blockchain but run on already existing blockchains.
One unique characteristic of Bitcoin is that it is scarce. That means that no more Bitcoins will be generated by the system. The maximum supply was set at 21 million units (BTCs). However, the circulating supply of Bitcoin can be easily accessed in real-time.
Key Differences between Bitcoin and Blockchain
One outstanding difference between Bitcoin and blockchain is the adaptability. While Bitcoin is a rigid digital currency that aids cross-border transactions, blockchain works as a ledger for Bitcoin and also caters to other industries.
Bitcoin seems like a closed system that thrives on anonymity. Transactions are recorded in numeric codes that are difficult for people to understand. Blockchain, on the other hand, is an open-source system that is now working with other sectors in compliance with rules and norms. Blockchain supports regulations like Know your Customer (KYC) and anti-money laundering.
Now, let’s look at the head to head difference between blockchain and Bitcoin:
- Definition – Bitcoin is a cryptocurrency while blockchain is a digital ledger.
- Main aim – Bitcoin aims to simplify digital transactions without government interference while blockchain aims to provide affordable, safe, and peer-to-peer transactions.
- Trade – Bitcoin is limited to trading as a digital currency while blockchain can convert anything from a currency to property or stock.
- Scope – Bitcoin is limited in scope by blockchain provides multiple use cases in several industries.
- Strategy – Bitcoin focus on reducing transactions costs by eliminating third-party intermediaries while blockchain adapts to any change to suit various business needs.
- Status – Bitcoin like to be anonymous while blockchain is transparent and works with other businesses while maintaining compliance with KYC and other norms.
Blockchain for business
The blockchain that powers Bitcoin was specifically developed for the cryptocurrency. It took a while for people to realize the potential of the technology in other fields. The technology had to be modified a little bit to accommodate rigorous standards that most businesses require. There are three distinctive features that differentiate blockchain for Bitcoin and blockchain for business.
Assets vs cryptocurrency
Several crypto investors and enthusiast are continuously discussing whether or not there is value in a token-free shared ledger. That essentially refers to a blockchain network without cryptocurrency. The fact is that blockchain can be used in a broad range of assets other than cryptocurrency. People can utilize the technology to manage tangible assets like real estate and food products. Other use cases involve intangible assets such as bonds, securities, and private equity. One outstanding business use case is Everledger. The platform uses blockchain to track the provenance of valuable goods to minimize fraud, double financing, and document tampering. Today, more than 1 million diamonds are secured on blockchain.
Identity vs anonymity
Bitcoin focuses on the anonymity of users. When you look at the Bitcoin ledger, you only see a meaningless sequence of numbers. Blockchain for business, on the other hand, requires businesses to adhere to regulations like AML (anti-money laundering) and KYC (know your customer). These compliance requirements demand that businesses should know exactly who they are dealing with. In other words, participants in the blockchain value privacy, the direct opposite o anonymity. Postal Savings Bank of China has developed an asset custody system that involves all stakeholders. They include financial institutions, asset custodians, clients, asset managers, auditors, and investment advisors. That way, everyone knows who they are dealing with. However, one client or advisor doesn’t need to see every transaction that has ever taken place, especially if the transactions relate to other clients.
Selective endorsement vs proof of work
In Bitcoin blockchain, a consensus is reached through mining. However, for blockchain for business, a consensus is reached through a process known as “selective endorsement”. The platform is designed in a way that you can control who verifies transactions, the same way businesses operate today. For example, when you transfer money to a third party, the transaction is verified by your bank, your recipient’s bank, and probably a payments service provider. With Bitcoin blockchain, the whole network has to work to verify a transaction.
So, blockchain for business offers a myriad of use cases, some of which have not been discovered. IBM Blockchain, for example, allows businesses to figure out and create a wide range of applications.
Both Bitcoin and blockchain are beneficial in their own way. With millions of cross-border transactions happening every day, the combination of blockchain and Bitcoin will make the lives of people across the globe better. But it is clear that blockchain technology offers a wide range of applications than Bitcoin. Many cryptocurrencies have cropped up through blockchain technology to offer even more use cases than the pioneering cryptocurrency, Bitcoin. It will be interesting to see how Bitcoin rises up to the competition in the coming years.