Bitcoin is not a synonym for the blockchain, but merely its best-known application to date. The principles outlined below also apply to other crypto assets.

Bitcoin versus Blockchain

The blockchain is the central component of the Bitcoin network, but it is not synonymous with Bitcoin. Blockchain applications can be used for many purposes, and the entire Bitcoin system does not consist of the blockchain alone, but of several components.

The payment system created by Satoshi Nakamoto is a rather simple special case of using a blockchain. The genius of the Bitcoin system lies not in the blockchain alone, but in the sensible combination of various existing technologies into an efficient whole. It is precisely in the simplicity and the restriction to the essentials that the strengths of the protocol lie. The simpler a system is, the fewer points of attack it offers.

"Progress is impossible without change; and those who cannot change their minds cannot change anything."
George Bernard Shaw


Cryptography deals with procedures for encrypting data. The Bitcoin network uses a classic asymmetric encryption method with private and public keys. This asymmetric cryptography increases the security of communication in untrusted networks in a scalable manner.

Cracking a sufficiently long private key is practically impossible. Only the person in possession of this key can initiate transactions on the network and send bitcoin from one address to another. Releasing a transaction with the private key simultaneously ensures the authenticity of the sender.

Therefore, the importance of the private key in the network cannot be overstated. Anyone who has the private key to a particular address on the network can freely dispose of the bitcoin associated with that address. No further proof of identity or ownership is required.

"People are very open-minded about new things - as long as they're exactly like the old ones."
Charles Kettering

Hash Functions

Very few people have an idea of what a hash function is. It is an essential component of all cryptoassets.

A hash function is a mathematical function. It assigns an output, the hash value or "hash" of the input, to every given input value. In doing so, it satisfies several criteria.

  • A hash function is irreversible: an output can easily be calculated from an input value, but the output value does not allow any conclusions to be drawn about the input.

  • Even marginally different input values yield completely different outputs.

  • Every input results exactly in a hash value

  • Two different inputs always result in different hash values.

  • The result of a hash function always has the same length, regardless of the length of the input.

  • A hash function must be computable quickly so that it can be used in practice.

There are several hash functions that are used for cryptoassets. The purpose of these functions is not, as is often assumed, to encrypt data, but to ensure the integrity of data.

"It is really want, rather than need, that drives the process of technological evolution."
Henry Petroski