Blockchain technology is a means of sending money back and forth whilst eliminating the middle man. It is a means of exchange which is used by people to buy goods and services. It does not necessarily specify that money is essential in these transactions.
“Money is not coins and banknotes. Money is anything that people are willing to use in order to represent systematically the value of other things for the purpose of exchanging goods and services.” – Sapiens (2011) by Yuwal Noah Harari.
Today, thanks to technology, we use digital services to use and track money. When using your debit or credit card, there is no physical movement of money anywhere. It is all happening virtually with trust on both sides of the transaction through a third party – the bank.
This is the problem of how money works today. We rely on a third party to transfer money for us and to establish trust. Often, this is not a problem but they have been known to fail sometimes. These failures can result in having your personal data and information stolen after it has been collected by a third party.
Traditionally you would need a bank account to receive and send money. With Bitcoin, the need for a third party is eliminated. Satoshi Nakamoto said: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” As a result Satoshi invented something called Bitcoin, a peer-to-peer electronic cash system.
One of the problems which Bitcoin had to solve was that it had to make sure that when you send someone money, you were mathematically guaranteed that the money couldn’t be copied or used twice. This is the double spend problem which had to be solved so a virtual currency could be used online. The important part of creating a digital currency was so individuals could send money peer to peer, with minimum infrastructure, and no third party.
Blockchain does not necessarily mean Bitcoin. Bitcoin uses blockchain technology to work, but blockchain technology does not need bitcoin to function. So you can consider Bitcoin one of the first successful applications to use blockchain. The blockchain is created by people running software on their computers. Anyone can download a copy and help run the network. In order to use the network, people use a currency, in this case Bitcoin. Once something is put on the blockchain, it can never be edited, removed or deleted.
Blockchain is distributed which means that the network has no single failure point. To take down Bitcoin you would need to destroy every single computer. It is also decentralized because no single person or organization owns the blockchain. It is owned and run by the community. It is also peer to peer as you can interact and send currency to anyone for a low fee. You also have the power to hold all your money. No bank account is needed.