The common confusion between bitcoin and blockchain is understandable.
This is because both bitcoin and blockchain share two major characteristics:
- They are both distributed peer-to-peer systems.
- They enable protocols for secured transactions.
Where Bitcoin differs from blockchain is that while Bitcoin is also a currency (with the lower case “bitcoin”) blockchain is not a currency. Blockchain can be applied to create a currency. But blockchain is not a currency.
The major reason behind the bitcoin-blockchain confusion is due to the characteristics they both similarly share.
The major reason for the bitcoin-blockchain confusion is that Bitcoin may mean all or any of the three things below, which blockchain is also capable of providing:
- A distributed peer-to-peer system: Bitcoin is a peer-to-peer system comprising participants whose job is to validate transactions before those transactions are recorded and added to the chain. It runs on a database or ledger comprised of transaction records which is distributed across a peer-to-peer network without a central authority. This makes Bitcoin a Blockchain called Bitcoin Blockchain. Bitcoin Blockchain involves Bitcoin transactions.
- A currency: Bitcoin is a cryptocurrency which is a form of electronic cash. It is not minted by any central bank but mined using cryptographic or mathematical algorithms. To differentiate this meaning of Bitcoin from Bitcoin as a Blockchain or network, some experts write Bitcoin as a currency in lower case, ‘bitcoin’. This cryptocurrency feature distinguishes bitcoin from Blockchain.
- A protocol (or software): Bitcoin is a protocol setting out the basic rules that allow data to be shared between computers. It is because Bitcoin is a protocol that is able to track every bitcoin transaction and then have these verifiable transactions constantly checked and then secured. Using the computing power of the entire network, transactions are secured. It is also as a protocol that the Bitcoin system is able to reward miners in bitcoin.
Bitcoin is a distributed peer-to-peer system, a currency, and a protocol. Blockchain can be applied to function the same way. This is the major reason for the common confusion between Bitcoin and blockchain.
Andreas M. Antonopoulos’s description of Bitcoin says it all
In his book, Mastering Bitcoin: Unlocking Digital Crypto-currencies, Andreas M. Antonopoulos similarly describes Bitcoin as follows:
- “Bitcoin is a fully-distributed, peer-to-peer system.”
- “Units of currency called bitcoins are used to store and transmit value among participants in the bitcoin network.”
- “Behind the scenes, bitcoin is also the name of the protocol, a network and a distributed computing innovation.”
Therefore, Bitcoin is a distributed peer-to-peer system, a currency, and a protocol. Blockchain can be applied to function the same way. This is the major reason for the common confusion between Bitcoin and blockchain.