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Blockchain and Bitcoin: Understanding the relationship

Blockchain and Bitcoin: Understanding the relationship

With the great importance and significance that cryptocurrencies have in today’s financial markets, we can no longer turn a blind eye to such a phenomenon. Especially if one wants to appreciate how it all works. First and foremost, one needs to understand the relationship between Blockchain and Bitcoin and that it goes beyond simply avoiding risk. This relationship allows us to delve into a greater potential which revolves around innovative technology ensuring success of transactions within its financial assets.

For this reason alone, cryptocurrency has in recent years become the target of growing attention. Additionally, fueled by remarkable price volatility. Hence we must understand that blockchain, in this particular context, is a decentralized ledger technology (DLT) in which all transactions of Bitcoin are recorded and noted.

In order better understand the relationship between Blockchain and Bitcoin, this article will shed some light on common topics discussed within the cryptocurrency ecosystem. Here you will learn:

  1. What is Bitcoin?
  2. Blockchain, its functions and why is it used?
  3. Relationship between Blockchain and Bitcoin.
  4. Advantages of Blockchain.

Continue reading to learn more!

1. What is Bitcoin?

Bitcoin is the world’s first decentralized digital cryptocurrency. It is an asset which can be transferred from one entity to another via the internet. Therefore, when compared to other alternatives, Bitcoin offers numerous benefits. Bitcoin can be transferred from person to person (peer to peer) without the need to pass through a financial institution or any other intermediary. Everything is done on the internet. Cost of money transfers are much lower versus fiat-based institutional money transfers, especially when sending internationally. Cryptocurrency has no geographical barriers making international transfers a default feature without additional requirements or limits.

Regarding Bitcoin, one needs to fully understand this simple truth. Bitcoin transactions are reliable. Users do not need to worry since cryptocurrency transactions work using Blockchain technology, which is responsible for recording the shared and public registry of all transactions, thus enabling a higher level of trust between sender and recipient. We will expand more on this in the following topics.

Regarding taxes, Bitcoin remains exempt. That is because it has no connection with central banks. In other words, no bank can emit the digital currency and Bitcoin does not belong to, or is controlled by any country. Bitcoin is generated by miners, which is essentially a free, open-source software program. available to everyone.

In order to better understand this process, lets compare Bitcoin mining to Gold mining. In the case of Gold mining, the Gold already exists and is only found by means of mining. Something similar happens with Bitcoin, but in a digital environment. Mining equipment is connected to the electricity and the internet which works to solve complex mathematical problems in order to mine Bitcoin.

As Bitcoin is now most commonly mined by pools, i.e. by several people or companies pooling resources to increase the probability of mining a block. Mined Bitcoin is divided proportionally according to each individual miners computational share in the pool. Users then withdraw earnings to a local wallet and now have complete control of their Bitcoin.

2. Blockchain, its functions and why is it used?

Blockchain is a technology ensuring security and validity of all Bitcoin transactions. Its structure is summarized as a set of nodes storing data in a decentralized fashion, which registers the sending and receiving information between parties making Bitcoin transactions.

Because of this, intervention of a bank, institution or other entity is not needed. Miners – those responsible for performing data validation – constantly arrange data from encrypted and compiled transactions into blocks. For this reason, the technology is called Blockchain. Think of it as digital information (the “block”) stored in a public database (the “chain”).

When one transfers cryptocurrency, the information is shared, checked and validated among countless computers called nodes. If most nodes do not recognize the movement performed, the transfer of value will be denied. This is how fraudulent & fake transactions are prevented from being validated & recorded into the Blockchain.

Thus, a secure decentralization occurs with thousands of people acting together to verify the authenticity of every transaction. All this occurs automatically and instantly by the software installed on every node.

How does it work?

It is important to note that when you install a Bitcoin wallet on your computer, it will first synchronize with the Bitcoin network. It means downloading the complete record of transactions from day one of Bitcoin’s life to present day. This may take some time to complete as Bitcoins blockchain has become quite large.

When Bitcoin transfer occurs anywhere in the world, the transaction is added to the Blockchain. For this reason, Bitcoins Blockchain file continuously grows in size. When a Bitcoin transaction is performed, a digital signature of the transaction with the private key that only the sender has access to is broadcast to the network.

The Bitcoin software examines the key in order to confirm its validity, and queries the database. If the key is confirmed, the transaction will be released If not, it will be denied. During this process, the attempt will be confirmed by the blockchain and generate the transaction code, which contains all transaction data, such as date, time, signature and value among other relevant elements.

This Bitcoin register, as we will discuss later, is immutable, i.e., it is impossible for a person to go back & edit. Thus, we can say that all above steps occur in an anonymous, confidential and coded way. Therefore, users can always feel safe with every transaction they perform.

What is the Blockchain for?

The Blockchain serves to avoid any information from being altered or modified during a digital transaction. This feature is able to guarantee authenticity of data from both parties and, at the same time, prevent a transaction from having its integrity altered.

As such, there is no longer a need for a third party to verify the validity of transactions, since blockchain provides the necessary security to carry out this process in a quick and risk-free manner.

3. Relationship between Blockchain and Bitcoin.

We need to emphasize that Blockchain can exist without Bitcoin, but not vice versa. This is because as with Bitcoin, Blockchain offers more security, credibility and transparency to transactions of this digital currency. Blockchain however, is not only used to perform this type of operation; it is also increasingly used by many other industries developing new solutions to increase data integrity, transparency and efficiency.

4. Advantages of Blockchain

Now that you have understood the concept of Blockchain, Bitcoin and more importantly the relationship between the two it is time to explore the advantages these technologies have to offer. Let’s read more.


Blockchain is an open-source technology allowing developers and users to track, audit, understand and even suggest improvements to the Blockchain at hand. Furthermore, every transaction made is known by everyone involved. In this way, credibility of operation is strengthened.


Decentralization occurs because each user participates within same set of rules agreed upon by the network. Each user has a copy of the Blockchain, meaning that at this very minute, the Blockchain does not depend on a central server to store your information. This is why within the cryptocurrency ecosystem, every user acts as his or her own bank.


One of the great advantages of blockchain is its immutability. This means that all records made within the Blockchain can not be changed under any circumstances. Thus, they are recorded and stored permanently. This factor is one of the benefits that draws attention to Blockchain, since it also contributes to reinforce the clarity of operations.


All this high-tech infrastructure allows people to feel more confident performing any kind of operation, not only for Bitcoin transactions, but also issuing certificates and payments.

Saving Time

Everyone desires financial transactions to be executed with great care and as quickly as possible. One of the benefits of Blockchain is the fact it saves time. Thus, it is no longer necessary to waste hours of your day checking if your transactions have been processed properly by centralized entities.

Sending Value Faster

By making a simple comparison with current banking systems, some financial transactions can take several days to complete. In fact, we are even exposed to unnecessary bureaucracies that can further delay the processes. The Blockchain, on the other hand, eliminates this type of inconvenience. Transactions process 24/7 and do not pause during weekends or government mandated holidays.


Are you now more knowledgeable about the relationship between Blockchain and Bitcoin? Well, while Bitcoin presents itself as an opportunity of profitability, the Blockchain appears as a tool that guarantees efficient and safe execution of its operations. This issue is fundamental when we talk about profitable cryptocurrencies, which is targeted to people who aim to take advantage of third-party assets.

Do you desire a secure platform to buy and sell Bitcoins and other cryptocurrencies? If so, sign up to use Bleutrade right now, learn more about our services and make your trades and transactions safer!


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