At first glance, the words cryptocurrency and Blockchain may seem interchangeable. You may wonder what the difference is. There is a significant distinction between these two ideas.
We typically use the phrases cryptocurrency and Blockchain interchangeably when discussing digital assets. Given the complexity and intricacy of this new technology, understanding the plethora of words and ideas around digital assets may be difficult.
There is a significant distinction between these two ideas. The contrasts between cryptocurrencies and blockchain technology, as well as the complexities and characteristics of these identical concepts, will be discussed in this article.
An In-Depth Look Into Cryptocurrency
To comprehend the distinctions between cryptocurrency and Blockchain, we must first comprehend the context in which these two phrases are used.
Cryptocurrency is a digital asset that acts as a trade means, similar to cash. Because cryptocurrencies are the digital equivalent of currency, they have three distinct properties.
- For a currency to serve as a medium of exchange, it must be able to maintain its value over time. Due to their limited quantity, cryptocurrencies are an excellent store of value.
- Cryptocurrency allows for a wide range of exchange transactions. You may pay for products and services using bitcoin.
- Cryptocurrency offers a consistent measure of the worth of products and services, allowing for straightforward comparisons of various items.
Bitcoin was the first decentralized cryptocurrency, and it works as peer-to-peer digital cash that is free of the control of intermediaries like banks and governments. With it came the idea of cryptocurrency trading, which remains prominent today. Since then, people have created over 2,100 currencies. They trade these currencies on public exchanges. Thousands more have been minted, but platforms have not listed them or promoted them to raise awareness.
Along with it came thousands more exchanges and platforms, some of which are unreliable. That’s why it also became more open to scams and hacking. Still, research and proper education remain essential before engaging in any trade.
Given that Bitcoin was the first decentralized cryptocurrency and the first use of blockchain technology, it’s natural to think that it and cryptocurrency are interchangeable.
Cryptocurrencies represent a measure of value on the underlying network. People may use them for various purposes.
People may use cryptocurrencies as a form of payment and utility
The most apparent and original use of a cryptocurrency is as a means of payment for products and services outside the local network. This use case is the same as any other currency, including significant fiat currencies such as the USD, CAD, EUR, and JPY.
Most cryptocurrencies serve a purpose beyond being used as payment. This purpose usually involves exclusive access to the platform. The platform releases the coin’s goods and services.
The distinction between a currency and a utility coin is that a utility coin grants access to a native network function, while a coin serves mainly as cash that may be used outside of the native network. Utility is another name for benefits. Token holders may receive numerous perks. These perks include voting rights and discounts on future platform services.
An In-Depth Look Into Blockchain Technology
The technology that underpins cryptocurrencies is known as Blockchain. We describe Blockchain as a decentralized ledger. It is a distributed worldwide network of computers. These computers monitor and record all transactions.
Blockchain technology’s ground-breaking invention results in the revolutionary characteristics of cryptocurrencies. These characteristics include transparency, immutability, and decentralization.
Digital currencies were simple to hack and reproduce before the invention of Bitcoin and Blockchain. We regard Blockchain as a breakthrough invention since it solves the long-standing difficulties with centralized digital coinage in the past by allowing all network members to share a shared record of truth.
Unlike conventional banking systems, no central authority administers the records or has any say in the network (every computer in the decentralized network keeps a duplicated copy of the unified database of transactions to avoid a single point of failure).
Miners play a crucial role in the network’s security. They authenticate transactions using cryptographic methods. They are compensated in the native currency for their efforts.
Blockchain Applications: From Smart Contracts to Supply Chain
On a larger scale, Blockchain serves as the infrastructure that allows cryptocurrencies to exist within the network. People can use Blockchain technology for various purposes, not just as a transaction like Bitcoin.
One of them is that it enables the formation of smart contracts, a ground-breaking feature of blockchain technology. In the digital realm, self-automated intelligent contracts are programmable contracts. This eliminates the need for third-party. Another usage of blockchain technology is the Codaprotocol. Coda presents the option to swap the traditional Blockchain for a tiny cryptographic proof, enabling a cryptocurrency as accessible as any other app or website.
Blockchain also aids in the management of digital identities. There are several concerns to consider while digitizing sensitive data, such as your identification to guarantee that your identity does not fall into the hands of a bad actor.
Regarding immutable, secure, and irrefutable identity authentication, Blockchain provides various options.
Blockchain has the potential to simplify the whole traditional supply chain, which is now sluggish, inefficient, and primarily manual. Blockchain can offer digitally permanent, auditable, and transparent records for all system stakeholders. This would significantly increase efficiency and accountability across various processes. Imagine being able to track your ordered items in real-time, following them from the beginning of the process all the way until they arrive at your doorstep. This level of transparency and real-time tracking would revolutionize how we manage and monitor the entire supply chain.
Bottomline
Although cryptocurrency and blockchain technology are sometimes interchangeable, they are two different ideas. Cryptocurrencies represent value. One party can move this value to another party. Blockchains serve as the underlying technology. They provide the essential infrastructure for cryptocurrencies to function.
Check out: How to Become A Blockchain Expert?