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, over 2,100 currencies have been generated and are traded on public exchanges, with thousands more having been minted but not listed on cryptocurrency platforms or receiving appropriate promotion 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 and may be used for various purposes.
Cryptocurrencies may be used 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 have a purpose other than to be used as payment. This is usually found in exclusive access to the platform that 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. The utility is another name for benefits, and token holders may be granted numerous perks like voting rights and discounts on future platform services.
An In-Depth Look Into Blockchain Technology
The technology that underpins cryptocurrencies is known as the Blockchain, which we describe as a decentralized ledger, a distributed worldwide network of computers that monitors and records all transactions.
The revolutionary characteristics of cryptocurrencies that we are all familiar with — transparency, immutability, and decentralization – result from blockchain technology’s ground-breaking invention.
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 part in the network’s security; they authenticate transactions using cryptographic methods and are compensated in the native currency for their efforts. On a larger scale, the Blockchain is the infrastructure that allows cryptocurrencies to exist within the network.
Blockchain technology may be used for various purposes, not simply 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. The capacity to proactively offer digitally permanent, auditable, and transparent records for all system stakeholders would increase efficiency and accountability significantly. Consider what it would be like to be able to follow your ordered items in real-time from the start of the procedure until you get them.
Although cryptocurrency and blockchain technology are sometimes interchangeable, they are two different ideas. Cryptocurrencies represent value that can be moved from one party to another, and blockchains are the underlying technology that acts as the essential infrastructure for them to function.
Check out: How to Become A Blockchain Expert?