It is difficult to determine the exact date when cryptocurrencies became something known to the general population. This certainly did not happen overnight, but Bitcoin has been spreading gradually since 2009, first on specialized forums, until a couple of years ago it became something that every person in the world knows about.
Bitcoin is a pioneer, and then many other cryptocurrencies and platforms were created, which, although they failed to overshadow Bitcoin, certainly have a very important place in the crypto world.
Over 100 million people own Bitcoin or some fragment of Bitcoin, and hundreds of millions of people own some other cryptocurrency, which means that the market is very large, now worth over 3 trillion US dollars .
But we are sure that many of the people who own a cryptocurrency, and especially many of those who have not yet invested money in it, do not know exactly how it all works. Even those who know basics often mistakenly equate blockchain and cryptocurrencies, while blockchain, although of great importance for cryptocurrencies, has many other purposes.
To help you completely understand this topic, we will explain the relationship between blockchain technology and cryptocurrency.
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Bitcoin and Cryptocurrencies
The emergence of Bitcoin is shrouded in mystery. Satoshi Nakamoto is the alleged creator of Bitcoin. Work on the Bitcoin code began in 2007 and it was officially launched on January 9, 2009. Whether it’s one man or a group of people, we’ll probably never know.
Even if it is really one man, it is very unlikely that his real name is Satoshi Nakamoto, but it is most likely a pseudonym. Just because we know so little about the creator of this revolutionary thing, the whole story is even more interesting.
Bitcoin developed gradually, at first it hardly had any value, and then the value grew from year to year. Although there have been a lot of declines in value, it has always bounced back and become even more valuable.
Bitcoin has paved the way for all other cryptocurrencies, whose creators we know and many of whom have used Bitcoin code, with minor modifications. And of course there are cryptocurrencies based on a completely different code like Ethereum, created by Vitalik Buterin.
Cryptocurrencies are becoming more and more used for the purchase of goods and services, so it is expected that in the coming decades they will become almost as important as fiat currencies.
We won’t tell you in this article how to earn money by trading crypto, you can find out that when you visit this site, but we will continue explaining some other things. Cryptocurrencies and platforms can also be used for many other things for which fiat currencies cannot giving them immense potential.
Blockchain technology, at least the idea, is much longer around than cryptocurrencies. Back in 1982, Cryptographer David Chaum first introduced the idea of a protocol that is remarkably similar to blockchain technology.
Technology was worked on in the following decades, and everything was well-documented. However, it was only Satoshi Nakamoto who introduced the blockchain as we know it today, or very similar, based on the Hashcash-like method.
It is easiest to imagine blockchain as an accounting book that is stored on a very large number of computers at all times and where each transaction is written in the so-called blockchain, without the possibility of anyone deleting any of them.
And every computer, or every node as it is called, has complete database and after each transaction, all nodes are updated almost immediately and simultaneously. This creates a peer-to-peer network where there is no centralized place where data can be modified nor is there a single point of failure.
Relationship between blockchain technology and cryptocurrency
To simplify things, although blockchain technology is used for many other purposes, cryptocurrencies without blockchain technology probably would not exist. And it is certain that they would not be so successful.
Every Bitcoin transaction ever, like any other cryptocurrency transaction, is entered in the blockchain. Each of these transactions is a new link that connects the transactions and we can say that it is written in stone, because with the help of today’s available technology, it is not possible to change the information in the blockchain.
Blockchain also brings a free market, as any person A can send cryptocurrency to person B without the need for banks to approve, thus potentially affecting whether person A or person B is eligible. However, even these transactions do not pass without verification. Miners are important in that part.
When person A sends Bitcoin to person B, a number of miners must confirm the transaction for it to be valid. Miners, ie their machines, check whether the blockchain is correct and whether it has not been manipulated in any way.
That’s why every node in the chain must have access to the complete database. How quickly the transaction will be confirmed and entered into the blockchain depends on the number of miners and many other factors. With Bitcoin, everything happens in seconds.
Other applications of blockchain technology
People have realized that blockchain is a revolutionary technology and can be used for many other things. Blockchain technology is ideal for data of great importance, which takes up little space, otherwise everything becomes too demanding in terms of hardware infrastructure and power consumption.
In these cases, we move to proof of stake instead of proof of work, but we’ll talk more about that some other time. For now, blockchain technology is certainly the most popular for financial transactions, but it is also used for landing, insurance, medical information, non-fungible tokens (NFT), and gambling.
In the future, it could also be crucial for the functioning of the Internet of Things (IoT). We believe that blockchain technology will be implemented in many other places, especially as the Internet becomes faster and the hardware more powerful.
Blockchain technology and cryptocurrencies are each very complex things that take a lot of time and effort to fully understand. And it’s especially complex to grasp the connection between these two new technologies that we didn’t even know about until a few years ago.
We hope we have helped you understand the basics and that the next time you buy a cryptocurrency or use it to pay something, you will know why you have to wait for the miners to approve the transaction and other things.