The first bitcoin transaction occurred on the blockchain because it makes bitcoin a decentralized system. Bitcoin was launched in 2008 by the founder named Satoshi Nakamoto. The main motive of starting bitcoin is to make the currency different from the fiat currency so everyone in the world can take advantage of it. Blockchain was the first platform for bitcoin transactions, and many people are using the blockchain. But now, there are a lot of bitcoin exchanges that provide the services with extra features to bitcoin users. Here are the differences between the bitcoin blockchain and bitcoin exchanges.
Bitcoin in brief:
Bitcoin is the popular cryptocurrency accepted globally, which means you can send and receive bitcoins from anywhere in the world. Bitcoin is a decentralized system that means no involvement of third parties, such as banks, financial institutions, or the government. Bitcoin is unstoppable, which means it will never stop in the future, like fiat currency. You have to crack all the computers working behind the bitcoin network worldwide to stop the bitcoin; that is impossible. The value of bitcoin is increasing day by day by increasing the uses of bitcoin. Bitcoin is more than a currency; that means you can do multiple things with bitcoin. Last month, the price of bitcoin was 45,000 dollars, and the current price of bitcoin is 67,157 dollars at the time of writing this article.
What is bitcoin blockchain:
The bitcoin blockchain is a platform to store bitcoin transactions. It is also known as a public ledger since you can see all the bitcoin’s latest and previous transactions by searching. Blockchain is the first platform for bitcoin that makes bitcoin a decentralized system. Since the first transaction occurred on the blockchain, many people think that bitcoin and blockchain are the same things. Bitcoin is a digital currency or coin, and blockchain is the platform where all the bitcoin transactions are stored. Blockchain is an open-source system that means there is not any supercomputer that holds all the transactions. Still, there are a lot of miners who are working behind the network. Blockchain uses miners’ computers or nodes to keep all the transactions.
Miners are the people who are experts in mathematics as well as in the programming language because they have to solve complex mathematical equations in a programming language to validate bitcoin transactions. Let’s take an illustration to understand the process of blockchain and mining clearly.
Suppose there are two people. The first is MR.X. The second is MR.Y. Both have a bitcoin wallet, and MR.X sent one bitcoin to the wallet of MR.Y. When MR.X sent a bitcoin to the wallet address of MR.Y, the bitcoin didn’t transfer to the wallet of MR.Y immediately. Because first, it gets listed on the blockchain as unconfirmed transactions. Miners will solve the complex equations to validate the transaction, and it can take up to 10 minutes to validate the transactions. After successfully validating the transaction, MR.Y will receive one bitcoin, and transactions will register on the blockchain. Mr X can, and MR.Y can check the transaction by inserting the transaction id.
What are bitcoin exchanges: –
Bitcoin exchanges are the third parties that provide the extra services to the bitcoin users that blockchain is not providing. There are many bitcoin exchanges on the internet. The number of exchanges is increasing by increasing the value of bitcoin. Go to the bitcoin equaliser for more information.
Exchanges are centralized systems, whether bitcoin is a decentralized system. Exchanges have a central point of failure: once the exchange gets hacked, all the bitcoin users can lose all the coins. Once you lose your cash, you will never get them back because bitcoin does not support a centralized system.
People use exchanges to take extra features that blockchain is not providing. When you do transactions through the bitcoin wallet, it first gets registered on the blockchain. It means everyone can see your transaction id, the receiver’s transactional id, and the transaction amount. Some people do not want to show the transaction id of their wallet. Hence, they use bitcoin exchange to generate the transaction id that no one can guess randomly. Exchanges charge higher fees than the bitcoin blockchain. Bitcoin exchanges are suitable for trading, but if you want security, you should go with blockchain.