For newcomers to the crypto field, many terms are difficult to understand, and some are even misleading. Some people refer to Bitcoin when they talk about blockchain technology, and some people refer to blockchain when they talk about cryptocurrencies. Although, these terms are related to each other, dueling pairs are not interchangeable. So, here we will introduce you to the basics of blockchain, cryptocurrencies, and Bitcoin.

The most basic analogy

Just imagine:

●     Websites are special technologies used to share information.

●     Search engines are the most popular and common way to use website technology.

●     In turn, Google is the most popular and well-known search engine.

Same:

●     Blockchain is a Special technology for recording information (data blocks).

●     Cryptocurrency is the most popular and common way to use blockchain technology.

●     In turn, Bitcoin is one of the most popular cryptocurrencies.

Blockchain: Concept

Most blockchains They are all designed as a distributed and decentralized digital ledger. Simply put, blockchain is a digital ledger responsible for recording transaction records. It can also be compared to a digital version of a paper ledger.

More specifically, a blockchain is a linear chain of blocks connected and protected by cryptographic credentials. Blockchain technology can be applied to other activities that do not necessarily require financial operations. At the same time, in the context of cryptocurrency, blocks will be responsible for permanently recording confirmed transactions.

"Distributed" and "decentralized" refer to the structure and maintenance of the ledger. To understand the difference, consider some common centralized ledgers in markets, such as public records of home sales, bank records of ATM withdrawals, or eBay sales listings. In each case only one organization controls the ledger: the government agency, the bank, and eBay. Another common factor is that these ledgers only have one copy of the general ledger, and everything else is just a backup and not an official record. Therefore, traditional ledgers are centralized in that they are maintained by a single entity and typically rely on a single database.

Blockchain is completely different. It is usually built as a distributed system and functions as a decentralized ledger. This means that there is no single copy of the ledger (distributed) and it is not controlled by a single individual (decentralized). Simply put, every user who decides to join and participate in the maintenance of the blockchain network will hold a copy of the blockchain data. This copy will usually be synchronized with other users' copies, and all the latest transaction data will also be updated. into the copy.

In other words, a distributed system is maintained by users distributed around the world working together. These network users are called nodes, and these nodes will verify and confirm transactions according to system rules. Therefore, power becomes decentralized (there is no centralization).

Blockchain: Principle

Blockchain The name comes from the way its records are organized: a linear chain of linked blocks. Essentially, a block is a piece of data that contains a list of recent transactions (like a printed record). These blocks and transactions are publicly visible but cannot be changed (like storing each page of records in a glass box). As new blocks are added to the blockchain, the linked blocks form a continuous record (just like a physical ledger with many pages of records). This is a very simple analogy, but the process of its formation is much more complicated than this.

The main reason why blockchain is difficult to tamper with is because all blocks are linked to each other and protected by cryptographic credentials. In order to generate new blocks, network participants need to perform expensive and intensive computing activities, a process called mining. The job of miners is to verify transactions and group them into newly generated blocks, which are then added to the blockchain (if conditions are met). Miners will also be responsible for introducing new tokens into the system, namely those issued as rewards for their work.

Each confirmed block will be linked to the adjacent previous block. The beauty of this setting is that when a new block is added to the blockchain, the data in the block cannot be changed, because the data in the block is protected by an encrypted certificate, and the encrypted certificate is It is expensive to produce and difficult to undo.

To sum up, the blockchain is a chain of interconnected data blocks, and the blocks will be linked in chronological order and protected by encryption certificates.

Cryptocurrency

Simply put, encryption Currency is a digital form of currency and will serve as a medium for fund exchange among users in a distributed network. Unlike traditional banking systems, cryptocurrency transactions are traceable through a public digital ledger (blockchain) and can occur directly between participants (P2P) without the need for any intermediaries.

"Crypto" refers to cryptographic technologies that ensure the security of economic systems, safeguard the creation of new cryptocurrencies, and ensure smooth transaction verification.

Not all cryptocurrencies are mineable, but most of them, like Bitcoin, need to rely on the mining process in order to have a slow and controllable Growing circulating supply. Therefore, mining becomes the only way to create new units of cryptocurrency, which avoids the risk of inflation that occurs with traditional fiat currencies.

Bitcoin

Bitcoin is not only the world The first cryptocurrency in the world and the most well-known cryptocurrency in the market. In 2009, a developer or development group under the pseudonym Satoshi Nakamoto created Bitcoin. The main idea of creating Bitcoin is also to build an independent and decentralized electronic payment system based on digital proof and cryptography.

Although Bitcoin is the most well-known, it is not the only one. There are many other cryptocurrencies in the market, and each one has its own unique properties and mechanisms. Additionally, not all cryptocurrencies have their own blockchain. Some cryptocurrencies are created on top of existing blockchains, while others are created incrementally from scratch.

Like most cryptocurrencies, Bitcoin has a limited supply, which means that no new tokens will be generated in the system after the maximum supply is reached. . The maximum supply of Bitcoin is 21 million. Typically, the total supply of a cryptocurrency is published after it is created.

Because the Bitcoin protocol is open source, anyone can view or copy its code. And many developers around the world have contributed to the development of this project.