Cryptocurrency and Blockchain are two words that seem to be thrown around in the news quite a bit.
What’s the difference?
Well, cryptocurrency is an all-digital form of money like Bitcoin while blockchain is a type of digital ledger for recording transactions.
Blockchain makes cryptocurrency possible by tracking data without being owned or controlled by any one person or centralized authority.
This means that cryptocurrencies can’t be hacked into, which has caused some people to have reservations about using them as a form of payment (though this hasn’t been shown to happen yet).
There is a lot of confusion about cryptocurrency vs blockchain.
Even when you are an expert in the field, it can be difficult to navigate all of the information and misinformation out there.
We’ll discuss more, compare and contrast cryptocurrency with blockchain technology.
And how they relate to each other in our article below.
Cryptocurrency vs Blockchain: What are They?
A little explanation of both…
What is Cryptocurrency?
A cryptocurrency is a decentralized digital currency that uses cryptography for security and anti-counterfeiting measures.
The first cryptocurrency created was Bitcoin, in 2009 by the mysterious Satoshi Nakamoto who wanted to create an un-hackable peer-to-peer cash system.
Even though there are many cryptocurrencies out on the market today, bitcoin remains as one of the most popular and stable cryptocurrencies around with its price determined mainly through supply versus demand economics (the law of demand).
Cryptocurrency uses what’s called the blockchain, which is a public ledger that records every transaction.
The cryptocurrency itself is not physical but rather an encrypted digital token stored in some kind of software or hardware wallet – this means it can be easily traded between individuals without third-party interference from banks and governments.
This is a huge advantage.
Cryptocurrency transactions can be borderless and don’t need to involve a third party. This means it’s possible for people in different countries with disparate currencies to transact without any conversion or government interference.
What is Blockchain technology?
On the other hand, Blockchain is a digital ledger that stores data in successive “blocks” where each block contains information on the date and time it was created, a reference to the previous block of data, and can contain various types of information.
Unlike traditional databases which are centralized (often managed by one entity), Blockchain has no central authority or server hosting all its records.
Instead, copies of this decentralized database exist across multiple servers with updates being made simultaneously.
There’s also no single point-of-failure for hackers to attack if they want to break into any given copy because copies from different blocks cannot be changed without altering other blocks as well meaning any hacker who tries will have their work undone when they try again.
Blockchain vs Cryptocurrency: How it works?
How Does Cryptocurrency work?
The transactions in Cryptocurrency are recorded on blocks and then linked together in a chain, which is why this technology is also known as blockchain.
The process of adding new records to the ledger ensures that older ones cannot be deleted without deleting every block following it.
A cryptocurrency can either be a digital or fiat currency used in peer-to-peer (P2P) exchanges like Bitcoin, Litecoin, Ethereum etc.
But unlike regular currencies they don’t have any physical form.
A cryptocurrency operates independently from central banks and has no control over economic decisions such as inflation rates or interest rates.
Cryptocurrency comes in form of coins and tokens and are usually bought, traded and sold via crypto exchanges.
Some of the popular exchanges are:
Exchanges aren’t recommended for storing and saving your cryptos.
This is where a crypto wallets comes in.
Wallets are hardware or software used to store, send and receive cryptocurrency.
How Does Blockchain work?
The way blockchain works is by having a group of computers called nodes which verify transactions.
Every node is issued with a copy of the blockchain and it’s duty is to validate any new transaction in order to maintain the records up-to-date.
When a block, or an encrypted chain of blocks gets completed, each node will send out this information so that other nodes can update their own copies as well.
As soon as one validation from at least 51% of all nodes has been received, then the block becomes linked to previous blocks (hence forming what you call “blockchain”).
So, the idea behind the blockchain technology is to create a secure and transparent way of recording transactions in an immutable ledger.
Blockchain has the potential to eliminate the need for third-party intermediaries, which can result in a faster and more reliable way of processing transactions.
It can be used to create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, or medical records.
The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
What is the Relationship Between Blockchain Technology and Cryptocurrency?
Blockchain technology is the foundation for cryptocurrency. Cryptocurrency, as a subset of digital currencies, refers to any form of currency that only exists digitally.
The two concepts are dependent upon each other:
Blockchain cannot exist without cryptocurrency and vice versa.
Blockchain was originally introduced alongside Bitcoin in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto with the intention of powering transactions on its network.
Blockchain technology enables cryptocurrencies like Bitcoin etc. by providing access to a database where all the information about every single coin in circulation are stored securely on thousands upon thousands of computers around the world.
There’s no one central place for it so hackers have nowhere else to go to try and find out where the money is.
Cryptocurrencies are digital currencies which use cryptography to secure transactions and control the creation of additional units.
In contrast, blockchain technology does not represent a currency but rather provides the backbone for recording data like transaction records or security ownership.
With help of blockchain technology, people are able to create digital tokens called cryptocurrency.
These electronic currencies have no physical form and can be exchanged for goods or services by using a wallet that stores the public key of the owner.
While they’re not strictly needed, these wallets also allow users to send their currency without being connected to an internet connection as well as keep track of transactions.
Does Blockchain need Cryptocurrency?
Blockchain is the technology that cryptocurrency relies on, but you can’t have a blockchain without currency.
Blockchain acts as an immutable public ledger of all transactions that are verified and shared by nodes in a decentralized network.
Cryptocurrency adds to this system with tokens or coins which represent units of value like stocks or cash.
The idea behind cryptocurrencies was to create digital money outside the reach of centralized banks making it easier for people around the world who don’t necessarily live near major financial institutions to participate in markets online.
Are all Cryptocurrencies Blockchain?
Many cryptocurrencies are blockchain-based, but not all.
Blockchain is the technology that cryptocurrency transactions take place on and there are many different blockchains in existence.
The most popular ones include Bitcoin, Ethereum, Litecoin, Ripple, Binance, Polkadot, Stellar Lumens, IOTA, and Monero.
Some of these currencies may have been created from a fork or branching off another currency’s codebase and only share some similarities with their parent.
Is Bitcoin part of Blockchain?
The Bitcoin protocol is built on a blockchain.
Bitcoin is the first cryptocurrency to be created and a whole bunch of cryptocurrencies has been built on top of its codebase.
However, Bitcoin has also changed significantly over time with new features being added regularly.
Which is better Coinbase or Blockchain?
Coinbase is a cryptocurrency wallet and exchange. You can buy, sell, send, receive Bitcoin (built on the blockchain) from its platform.
Cryptocurrency and Blockchain are similar technologies, but they operate in different ways. Blockchain offers a way to securely track data and cryptocurrency provide the mechanisms for making transactions.
Cryptocurrency operates on blockchain technology, which is popular because of its secure transaction history with no need for a central authority or middlemen like banks.
Blockchain is often described as being “the next generation” of the internet due to its decentralized nature.
It provides an immutable ledger that cannot be changed by anybody unless all nodes agree on it; eliminating any potential for fraud or discrepancy with data.
That said, blockchain technology may not be able to solve every problem out there – cryptocurrency has become increasingly popular because it offers some advantages over a traditional system like Bitcoin.