Bitcoin is a form of digital currency held and created electronically. It is a cryptocurrency hence it is unregulated, unlike fiat money. The transactions of Bitcoin are recorded in a Blockchain, which represents a public ledger of all Bitcoin transactions in the world. Bitcoin works as a regular currency and is used to make transactions based on the monetary value of the item. Blockchain is used to keep a record of the transactions done to offer a clear and precise paper trail of how the wealth has changed hand (Swan, 2015).
Bitcoin was started by Satoshi Nakamoto, who proposed the idea of a currency based on mathematical proof rather than the gold backup in fiat money. Blockchain was implemented in the source code of Bitcoin in the year 2009. Bitcoin is used as a store of wealth and as a means of maintaining anonymity when purchasing items. On the other hand, Blockchain is used as ways to safeguard the users of Bit coin. Block chain addresses the actual transaction made as a bank statement while the Bitcoin is used for the actual sale. The two are not interchangeable as a Blockchain is only a record of the transaction while the Bitcoin is the currency used in the transaction (Swan, 2015).
Bitcoin mining takes place by solving mathematical problems set up by the source code developed by Satoshi Nakamoto. The setup of Bitcoin is meant to ensure that transaction costs are zero in the market hence no direct cost incurred in using the two. Since the currency is unregulated, the developers put a roof ceiling to the production of the Bitcoin to 21,000,000 units. Anybody can use the digital currency due to benefits such as anonymity and lack of international transaction fee. The downside of the system is that it favors illegal practices due to the level of anonymity. Bitcoin does not offer much to corporate finance as it is not well regulated hence it is not widely used like fiat money. Risks of being hacked and lose of the entire Bitcoin by an individual is incredibly high as the process needs internet to work (Swan, 2015).
Reference:
Swan, M. (2015). Blockchain: Blueprint for a New Economy. " O'Reilly Media, Inc.".
