Quick Answer: Bitcoin is a type of crypto. When you say crypto you are referring to all crypto assets or the crypto industry in general whereas Bitcoin refers to the digital currency and its blockchain. In this post, I will help you understand what sets Bitcoin apart from the rest of crypto.
- Bitcoin vs. Crypto: What Is the Difference?
- Bitcoin vs. Crypto Infographic
- How Bitcoin and Crypto Started
- When Did the Words “Crypto”, “Bitcoin”, and “Cryptocurrency” Start Being Used
- The Emergence of Other Crypto Coins as Competitors to Bitcoin
- How Bitcoin Stands Out From the Rest of Crypto
- If Bitcoin Is Digital Gold What Is Crypto?
- How Do You Use the Word “Crypto”
- Similarities Between Bitcoin and Crypto
- Summing Up
- FAQs
Bitcoin vs. Crypto: What Is the Difference?
Cryptocurrency refers to a digital or virtual form of currency that utilizes cryptography to verify transactions without the need for a central intermediary.
Bitcoin, on the other hand, is a specific type of cryptocurrency that was the first to be introduced and remains the most recognized and widely used.
To understand the two concepts better let’s take a look at how cryptocurrency and Bitcoin emerged.
Bitcoin vs. Crypto Infographic
How Bitcoin and Crypto Started
The concept of a digital currency can be traced back to the early 1980s when computer scientist David Chaum introduced the idea of anonymous electronic money.
A bunch of people had worked on the problem since but none of them had been successful.
The Double Spending Problem
See the main problem with digital money is that it’s very hard to make it unique.
For example, I could declare this image a form of digital money and send it to you in an email.
But what is to prevent me from keeping a copy of the image or from duplicating it a million times?
To stop that from happening we would need someone to check that you have the image and that I don’t.
And this is why we have central intermediaries such as banks who do precisely this with the money in our bank accounts.
This money does not exist in cash or gold. It’s just digits in a database.
But you feel secure because when a friend sends you $10 you know the bank has debited $10 from your friend’s account and credited yours. That person can’t use the $10 anymore.
This issue is known as the double spending problem in cryptography and was a massive headache until Bitcoin came along.
How Bitcoin Solved the Double Spending Problem
Bitcoin solved the double spending problem using cryptography.
I won’t go into the weeds here because it will give you a headache but suffice it to say Bitcoin uses a technology that makes it impossible to double spend.
And it does this without a central authority.
Instead, anyone can use a machine called a miner to verify transactions on the blockchain.
When everyone agrees on the next bunch of transactions new block is added to the blockchain and can never change from there on.
Bitcoin’s decentralized nature, achieved through the use of blockchain technology, was a groundbreaking innovation.
It eliminated the need for intermediaries such as banks and governments, allowing individuals to have full control over their financial transactions.
Think about it.
We’ve never had this before.
Sure we had digital money.
But we never had the internet of money.
When Did the Words “Crypto”, “Bitcoin”, and “Cryptocurrency” Start Being Used
When Satoshi Nakamoto, an anonymous person or group, published Bitcoin’s white paper in 2008, the term crypto was in use but it did not refer to cryptocurrencies.
Instead, it was used to refer to the field of cryptography.
However, after Bitcoin was launched people started using the term “cryptocurrency” to describe it.
The term “crypto” has existed since the late 80s but it was only with the advent of Bitcoin that its usage became mainstream.
The Emergence of Other Crypto Coins as Competitors to Bitcoin
Since the introduction of Bitcoin, thousands of other cryptocurrencies, known as altcoins, have emerged.
The most famous of these is Ethereum.
The Ethereum network was developed in 2013 by then by 19-year-old whizz kid Vitalik Buterin.
Vitalik had been studying cryptography at university in Canada when he came across Bitcoin.
Seeing its potential, a series of events eventually led him to develop his own blockchain network called Ethereum.
What’s special about Ethereum is that it is a more generalized blockchain.
While Bitcoin is mostly a one-trick pony in that it is a currency, Ethereum allows you to program anything on top of it.
How Ethereum Stood Apart
What was groundbreaking about the Ethereum blockchain was that allowed developers to write smart contracts.
A smart contract is a piece of code that allows you to embed logic into the blockchain.
So you could write something like: “If x amount is sent to this account then do y”
This was revolutionary.
For example, you could now build a decentralized application that does lending and savings just like a bank. (Yes it exists! To see an example read up on Compound crypto)
What’s more, you could issue your own token called an ERC-20 token. According to Bitpay there are more than 450,000 different types of crypto tokens on Ethereum alone.
You can read more on Ethereum in this post. In fact, if you are new to crypto I encourage you to start there.
What Are Altcoins?
After Ethereum launched, a bunch of other platforms emerged.
Collectively they are known as altcoins and each wants to be bigger, better, and faster than Ethereum.
Each altcoin has its own unique features and purposes, catering to different needs and preferences within the digital currency ecosystem.
Most of them started by competing against Ethereum on transaction fees.
Each of these platforms in turn has developers building apps and protocols that provide financial services and issue their own tokens on top of them.
Here are some examples
- Ripple (XRP), focuses on facilitating fast and low-cost international money transfers.
- Others aim to provide privacy and anonymity, such as Monero and Zcash.
- Litecoin, another popular cryptocurrency, was created as a “lite” version of Bitcoin. It was designed to have faster transaction confirmation times and a different hashing algorithm, making it more accessible for everyday transactions.
Hence when people say crypto they are referring to the collection of ecosystems (platforms, protocols, and tokens) that have been built.
So if altcoins are so great how come Bitcoin dominates the market?
Bitcoin’s closest rival (Ethereum) has less than half the market value of Bitcoin.
How Bitcoin Stands Out From the Rest of Crypto
Bitcoin, as the first cryptocurrency, has certain unique characteristics that set it apart from other cryptocurrencies.
#1. Fixed Supply
Firstly, Bitcoin has a limited supply of 21 million coins, which distinguishes it from traditional money like the U.S. dollar, which can be endlessly printed.
This is important. Let it sync in.
For the first time in history, you have a currency that has a fixed supply and can’t be touched by a third party.
The Bitcoin blockchain will always exist.
It is unstoppable.
No one can intervene to stop it from existing. It is too decentralized for that to happen.
And it’s supply will always be fixed. You can’t change it.
Period.
This has powerful implications.
Think back in time.
People have used all sorts of things for money. From seashells to precious metals but never has the supply been fixed.
Even gold, which is considered to have the most inelastic supply, grows at 2% per year.
Bitcoin has already created 93% of its supply and after 2140 there will be no more of it.
This is why people consider Bitcoin to be a store of value.
It is a type of money that exists in digital form and has a fixed supply.
This is not true of other digital assets.
The majority of them have a variable supply.
While Bitcoin hasn’t become the medium of exchange for everyday transactions it has taken on the role of digital gold.
It’s not cash but it is money you can’t mess with.
#2. Bitcoin Guzzles Electricity
Another key difference between Bitcoin and many other virtual currencies is the consensus mechanism used.
While Bitcoin relies on proof-of-work (PoW) to validate transactions and secure the network, other cryptocurrencies have explored alternative consensus mechanisms.
Proof-of-work requires powerful machines called miners to use up electricity in order to solve difficult puzzles.
Bitcoin has come under attack for using so much electricity and other cryptocurrencies have pivoted away to less energy-demanding solutions.
For instance, some cryptocurrencies, like Cardano, use a proof-of-stake (PoS) algorithm, where validators are chosen based on the number of coins they hold and are willing to “stake” as collateral.
Bitcoin’s supporters counterargue that a large proportion of miners use renewable energy sources.
If Bitcoin Is Digital Gold What Is Crypto?
Satoshi originally envisioned Bitcoin becoming a means of exchange just like the US dollar.
It hasn’t worked out that way though.
While the Bitcoin Network is extremely robust in terms of security it can only process about 4 transactions per second.
Blockchain developers became so frustrated with this that they tried to launch alternatives such as Bitcoin Cash and Bitcoin Satoshi Vision (Bitcoin SV).
Those haven’t really caught on either.
Instead, the Bitcoin narrative has changed and the store of value aspect has stuck with people for now.
Just like how you don’t go grocery shopping with golden nuggets you use Bitcoin to preserve or increase the value of your holdings but you don’t use it in the supermarket just yet.
The Bitcoin community is still toying around with ideas on how to make transactions on the Bitcoin Network faster.
The most promising of these is called the Lightning Network but not everyone is convinced that this is the best solution yet.
Stablecoins Explained
In the meantime, a lot of the other crypto coins are hoping to get the masses to think of their crypto coin as a medium of exchange.
For example, the Dogecoin community primarily markets DOGE as a medium of exchange. And most other cryptocurrencies are vying for that position too.
Contrary to what crypto enthusiasts expected the cryptocurrencies that ended up being used the most as a medium of exchange were those representing the US dollar.
These types of cryptocurrencies are called stablecoins.
Technically they are tokens on top of a blockchain where each token is pegged to the value of a dollar.
There are all sorts of stablecoins but the largest ones are USDT and USDC both of which take your dollar and give you a token and then keep your money in cash or cash equivalents.
It is kind of ironic that things have ended up that way because many ardent crypto proponents argue that crypto will one day replace fiat currency.
Crypto Coins vs. Tokens
Technically, a crypto coin is what people who verify transactions (miners) on the blockchain get paid. So if you verify transactions on the Bitcoin Network you get paid in Bitcoin.
And if you verify transactions on Ethereum you get paid in ETH. And so on.
These coins are called the “native coins” of the blockchain.
Many of these blockchain platforms allow you to issue your own token. A token is like a coin except it is not used to reward miners.
Instead, you use it to transact in the application that has been built on top of the blockchain.
For example, when I transact on Uniswap, a decentralized exchange that has been built on top of Ethereum I am rewarded in UNI tokens.
In practice, people use the terms interchangeably though.
How Do You Use the Word “Crypto”
Most often the term crypto refers to cryptocurrencies.
But you can also use the terms to refer to the industry overall.
For example, you can see “These are the top headlines in crypto today”.
In this context, crypto refers to the crypto coins, investors, crypto exchanges, and anyone else involved in the market as a whole.
Similarities Between Bitcoin and Crypto
There are three common denominators that are common to Bitcoin and all other crypto projects.
- Bitcoin and other cryptocurrencies offer pseudonymity rather than full anonymity. While transactions are recorded on the blockchain, the true identities of the individuals involved in the transactions remain undisclosed. This pseudonymity offers a certain level of privacy, but it does not guarantee complete anonymity.
- Another key feature of Bitcoin and crypto is their decentralized nature. Unlike traditional currencies that are controlled by central banks or governments, Bitcoin and other crypto operate on a decentralized network called the blockchain. This means that no single entity has control over cryptocurrencies, making them resistant to censorship and manipulation.
- Cryptocurrencies, including bitcoin, can be stored in digital wallets. Anyone can see your crypto wallet address but they would need a private key that only you have access to if they wanted to move the crypto out of the wallet. Think of it like your house. Your friends know where you live but only you have the keys. If you don’t have a cryptocurrency wallet and want to learn more check out my explanation of what is a crypto address.
Summing Up
The terms crypto and Bitcoin are often used interchangeably, but it’s important to understand that crypto is an umbrella term that encompasses various cryptocurrencies, while Bitcoin is a specific cryptocurrency.
When someone refers to crypto, they are referring to the broader concept of digital currencies, whereas Bitcoin refers specifically to the decentralized virtual currency introduced by Satoshi Nakamoto in 2008.
FAQs
Is cryptocurrency and Bitcoin the same thing?
Bitcoin is a type of cryptocurrency. It was the first crypto to be created and it has the highest market capitalization (price x volume).
Is Bitcoin the only real crypto?
No, there are more than 20,000 crypto coins and tokens being traded today. Bitcoin maximalists will tell you that only Bitcoin matters and the rest are nonsense. They will often call other crypto coins shitcoins. However, in the first three quarters of 2023 Bitcoin made up 50% of the total market value of all cryptocurrencies. This indicates that the market values the other cryptocurrencies too.
How does crypto make you money?
There are two ways to make money with crypto. The first is to buy a crypto coin and hope that's its value increases. If that doesn't happen then this also a good way to lose money. The second way is to to lend your crypto to a platform that needs it. They may lend it to others or put it to some other use like staking or market making or liquidity provision.
Why is Bitcoin not money?
When people say Bitcoin is not money they usually mean its not a good medium of exchange. This means you will probably not use bitcoin to buy a pack of chewing gum. The main reason for this is that Bitcoin processes about 4 transactions per second. Contrast this against Visa who process 24,000 transactions per second and you begin to see the problem.
Is Bitcoin a stock or crypto?
Bitcoin is a crypto i.e. a cryptocurrency. It is not a stock. You can get indirect exposure to bitcoin via stocks if you invest in the stock of a crypto mining company. These companies generate revenues in bitcoin.
Is crypto real money?
Crypto is not tangible money. You can't hold it. But it does have value. You can easily sell Bitcoin for real dollars or euros or any other currency on an exchange and transfer that to your bank account.
Up Next
Why Is Cryptocurrency Worth Anything? Unknown Secrets
So why is cryptocurrency worth anything? Really now. I can’t meet any of my everyday needs with it. Can’t buy coffee. Or groceries. Can’t buy shoes or clothes. I can’t pay my utility bills or Netflix subscription. Can’t pay my mortgage installments with it, medical expenses or private school fees for my kids. I can’t use it on vacation or for transportation. The whole damn thing sounds pretty useless to me. They should remove the word “currency” from the term and stick with “crypto”. Or even better christen it “Cryptic” because no one really understands what this thing is about in the first place. Read more.