What’s the difference between cryptocurrency and blockchain? This is often a question that arises whenever the terms, ‘cryptocurrency’ and ‘blockchain’ is thrown around. So, in this blog, we will take a look at the main differences that separate blockchain from cryptocurrency.
What Differentiates Cryptocurrencies From Blockchain?
Let’s take the example of Bitcoin to explain the difference between blockchain and cryptocurrency.
Coming to the differences, the biggest factor that separates blockchain from cryptocurrency will be the umbrellas under which they are placed. For instance, blockchain is an umbrella in itself, and cryptocurrencies are placed under it. In fact, so many cryptocurrencies are placed under the blockchain umbrella and Bitcoin is one among them.
Explaining Blockchain Technology
Blockchain is the technology that brought cryptocurrency to existence. What’s more, cryptocurrencies can be also thought of as the poster child for blockchain technology. Though blockchain technology was first invented to bring Bitcoins to the existence, cryptocurrencies aren’t the only application of blockchain technology. Presently, developers are finding more and more uses of blockchain.
A non-centralized ledger, that is what blockchain is. Blockchain records all the transactions that happen between two people over the network. Blockchain acts as the central clearing authority and confirming transactions and it takes the place of financial institutions.
For instance, you deposit money in the bank to ensure its safety and also for the convenience of making transactions. The bank or any other financial institution then act as the clearing authority for all the transactions you make from your account and charge a transaction fee for it. Furthermore, the entire process also consumes several days.
Blockchain being a public ledger, on the other hand, enable protected transactions and charges no fee for sending or receiving coins or tokens. The transactions also receive confirmation within a few minutes.
Now, let’s talk about how blockchain got its name. Blockchain records all the transactions that happen as a block on the chain. The transactions are accessible to anyone, and it contains an identification number to keep the identity of the individuals anonymous. Blockchain cuts out the need for a third-party or middleman and this is considered the major benefit of blockchain.
Cryptocurrency is nothing but a medium of trade like government monetary notes, except for the fact that their trades happen in the digital space. The buying and selling of cryptocurrencies happen on crypto exchanges which works similar to stock exchanges.
Cryptocurrencies can be either tokens or coins, and their transactions occur in the blockchain ledger technology. Coins or tokens are equivalent to a share of stock.
Right from its invention, developers have been working hard to put together encryption methods in order to secure and verify monetary transactions.
All thanks to Bitcoin, blockchain technology gained international recognition. In the coming years, we are pretty sure we will see more unique uses of blockchain technology as well. After all, a lot of developers are working behind the screen to find new ways to use it.
Thus, when investing in cryptocurrency, be aware that you aren’t just investing in some sort of digital currencies, but the companies use of blockchain.