The word “blockchain” has been thrown around a lot over the last few years, but few people truly know what it actually is. The blockchain is the record-keeping technology behind the Bitcoin network. If we were to use once sentence to describe it, it would be that the “blockchain is a distributed, decentralized, public ledger”. This definition may sound complex, but it’s really not that complex to understand.
The blockchain is a global computer network that allows for near instantaneous financial transactions to occur, with minimal fees. In addition to this, applications, automated smart contracts and data exchange can all occur on the blockchain. Many industries have been excited by the value that this technology can bring to the world. Billions of dollars have been invested into the development of blockchain technology in industries including finance and banking, real estate, auditing, government, shipping and transportation, entertainment and media.
Distributed applications, which are software in which computing work is done by a global network of computers (instead of by a single computer), use the blockchain. The advantage of this is that it greatly increases the computing power that’s available to run complex software. In addition to this, large corporations can store and process information on the blockchain, instead of having to invest so much money into building centralised database infrastructures. Many experts are comparing the growth of blockchain technology to the Internet book of the early 1990s.
Common uses of blockchain technology include:
Near-instantaneous financial transactions worldwide with minimal fees
Digital identities to sign into websites or to sign documents
“Smart contracts” that execute automatically when conditions are met
Audits of insurance claims therefore lowering the risk of fraud
Records of digital assets, land titles and frequent flyer miles
Logging finance company records, reducing the risk of them being tampered with
Confidential storage and transmission of healthcare and other sensitive data
What is Bitcoin?
Bitcoin (BTC) is the first decentralised cryptocurrency (digital currency) to ever be created. It's used in electronic transactions over the blockchain. Bitcoin can be converted to and from traditional fiat currencies, as well as to and from other cryptos.
Bitcoin is special for a number of reasons:
It's a cryptocurrency used in financial transactions on the blockchain. A payment can be made from person to person almost instantaneously.
Although each transaction is recorded publicly on the blockchain, the identity of both parties is not public
BTC can use blockchain technology to perform functions like software and the storage of information
Bitcoin can be exchanged like money and it's recognised as a store of value, similar to gold.
There can only ever be twenty-one million bitcoins in existence. Thus, bitcoin is not subject to the inflation and devaluation that occurs with traditional money when more of it is printed.
Powerful computer hardware can be used to "mine" bitcoins. This is where bitcoin is awarded in exchange for computing power that's used to verify transactions.
What is Cryptocurrency?
Cryptocurrency (digital currency) is a currency or medium of near instantaneous, secure, electronic transactions. We have already been transmitting fiat currencies electronically for decades. Cryptocurrencies are used specifically for electronic transactions, and they can also store important information or perform functions like software.
Each concurrency has different characteristics and functionalities:
Cryptocurrencies are traded on global market exchanges, similarly to how stocks are traded on the New York Stock Exchange (NYSE). Many trading methods and chart indicators for cryptocurrencies and stocks are almost identical.
Some cryptocurrencies are designed for transactions between banks, whereas others are designed for exchanges between hospitals, insurance companies, or individuals.
Cryptocurrencies can also store information related to real estate transactions, tracking of shipments, frequent flyer miles, confidential health information, or contracts. The uses cryptocurrencies are much more vast than these examples, which is why the blockchain and cryptocurrencies have been supported by billions of dollars of investments from institutions, governments, and venture capital firms. The development of blockchain technologies has created opportunities for investment and trading.