There are a number of people who are just exploring the world of blockchains recently. People often confuse the blockchains with cryptocurrencies. Some tend to believe that they are just synonyms. Well, you can guess they are not certainly the same thing. So, what are the big differences between them? Hold your horses, you will know everything about these two in this blockchain vs cryptocurrency article.
Blockchain vs Cryptocurrency: What is a Blockchain?
Okay, so first comes the blockchains. The blockchain is a technology where transactions or data are stored. Each block in the chain contains a unique piece of data or information. These blocks combine a complete chain and work like a big digital ledger. All the data are stored chronologically.
At the very beginning when Satoshi Nakamoto invented the technology he named his blockchain as Bitcoin. Again the name of the cryptocurrency in the ecosystem is also Bitcoin. This is where the confusion started. Then it was just a peer to peer electronic cash.
After the economic crash in 2008, the world was crying for a new money that will not be lost due to some mistakes by the banks. The world just hated the banks as a lot of people lost everything they had. Bitcoin started showing the potential to be the new bank-proof (!) money that people can rely on.
Later on, many other blockchains came to light like Ripple and Ethereum. They made the technology even more sophisticated. They showed us that a blockchain can have many other aspects. It can store any sort of data. In a sense, it was a technological boom. What people can do with this blockchain technology is limitless.
Features of Blockchains
A blockchain has 4 key features. They are as follows,
1. Decentralized. So, no one can modify or manipulate the way a blockchain should act.
2. A distributed ledger to bolster against the frauds and easier management.
3. Minting of coins is a common scenario. You could think of mining Bitcoins as coin minting.
4. Tamper free ecosystem.
Blockchain vs Cryptocurrency: What is a Cryptocurrency?
Cryptocurrency is a whole new different story! You can call it the asset the blockchain technology uses – the money of the network. In technical terms, people often call it the “tokens”. Although, there are blockchains that don’t use tokens in their ecosystem. It’s a tokenless blockchain. Ripple without their coin XRP can be a great example of such type. We will get to that later, that’s another story.
When we exchange materials or services we have to use a common monetary item that both parties agree to trust to have value. Cryptocurrency is that common asset that both parties have their trust on – medium of exchange.
You can put it like this – blockchains are the federal bank of US and cryptocurrencies are the US dollars.
As we have seen the tokenless blockchains there are blockless cryptocurrencies too. IOTA is a great example of such kind of distributed ledger company.
Not every coin has the same name of the Blockchain it uses. Like, Ethereum uses Ether (ETH) and Ripple uses XRP.
Multiple cryptocurrencies can be built on the same blockchain. For example, even you can make your own cryptocurrency using the blockchain of Ethereum. The technology is really sophisticated and solid.
How Could You Own Cryptocurrencies?
So, do you want to own cryptocurrencies? There are commonly two scenarios about how you could do it –
1. Mine the currency using your processing power and electrical power.
2. Buy the currency from any trusted crypto exchange center.
Features of Cryptocurrencies
There are some common features or properties of the cryptos,
1. Irreversible, meaning, when the transaction is made where is no way back.
3. Fast and secure
4. You don’t need to ask permissions to give or take money from someone.
5. Market supply is strictly controlled. There are only a limited number of bitcoins on the planet.
6. Based on the IOU system so there are no debts.
So, guys, this was it. I think you get the gist of the blockchain vs cryptocurrency confusion. Don’t ever get confused on the topic. If you are planning to invest in the cryptocurrencies, you should better get an idea of everything that matters. Here are some great articles that would get ahead of the race of knowledge. Hope you have a great journey ahead!