Many of us understand Bitcoin as Blockchain. In many cases, the words Bitcoin and Blockchain are used interchangeably. But Bitcoin and Blockchain are two different things. Blockchain is a technology that has been used for creating Bitcoin.
Let’s take the financial sector as an example to understand better.
In a centralized system like banking system
If I want to send money from my bank account to someone else’s bank account in the traditional way, then the transaction has to be done through the bank. Money will be sent if the bank wants, money will not be sent if the bank does not want to. One thing when the bank is open, another thing when the bank is closed. In order to send that money, if the bank takes a 2% commission today, then it has to be paid. Later, if the bank takes a 3% commission tomorrow, then it has to be paid also.
It is a centralized system where the bank is a 3rd party that is taking all the responsibility for our transactions. So they are obliged to take a commission fee from us in return. Not only that, but the bank will also know everything about whom, when, how much money I sent for a transaction, and if they want, they can also share the information with someone else.
In a decentralized system like Blockchain system
But the Blockchain system is a decentralized system, with no one overseeing it. In other words, if I send money to someone in the Blockchain system, then all the information about the amount of money I have sent, to whom I have sent, etc., will be stored among all the users in that system. Of course in an encrypted format. So that no one but the system can read it.
Since the information of a particular transaction is being stored with all the users, no one organization or person has to take responsibility for the authenticity of that information. As a result, there is no need to flatter anyone. Whenever someone tries to tamper with a piece of information, the Blockchain system will automatically be able to verify its authenticity by comparing that information with information stored with other users.
Let’s take A, B and C users in a Blockchain system for an example
Suppose there are A, B and C users in a Blockchain system. Like, a bank has many account holders. Now if person A sends money to person C, then all the information of that transaction will be stored with all the users of that Blockchain system. In this case, person A has sent money to person C, this information will be stored among A, C and B as well. But no one will be able to read that encrypted information other than the system itself. No bank or any such 3rd party is required to supervise this transaction. So there is no extra charge on the transaction and no one else can know who, to whom, when a transaction has occurred.
Bitcoin is built using the Blockchain technology
The technology in which this whole system is built is called Blockchain, and Bitcoin is a financial service provider built with Blockchain. We can purchase Bitcoin in exchange for money and buy other things using that Bitcoin. If we want, we can also send Bitcoin to anyone, like sending money. If you use Bitcoin, you will get all the benefits of Blockchain technology that I have mentioned earlier.
In addition to Bitcoin, many decentralized applications have been created with Blockchain technology. Not only in the financial sector but also in various industries for various jobs such as employee management, customer management, educational certification, etc., many Blockchain applications are being made and used.
