There is a lot of confusion about what cryptocurrency and blockchain are. Many people have heard of cryptocurrencies but don’t know much about them or understand how they work. In this article, we’ll go over the differences between cryptocurrencies and blockchain, discuss why you should be using each one, and give you an overview of what a cryptocurrency is and its role in the digital world.
What is a cryptocurrency and how does it work?
A cryptocurrency is a digital currency that runs on a blockchain network. A blockchain network is a decentralized and distributed public ledger that contains all the data and transactions of all the parties involved. A cryptocurrency is a software implementation that uses cryptography to regulate and verify transactions and store data. Cryptocurrencies can be used as an investment, as a store of value, and as a means of transfer of value.
What is a Blockchain? – The Basics
A blockchain is a decentralized, distributed ledger technology that’s used to track and record transactions across a diverse range of industries. It’s like a massive computer that’s shared and run by all the participants in the network. A blockchain is essentially a very large electronic bookkeeping system that’s distributed and decentralized, which is what makes it different from a traditional database management system. The data stored on the blockchain is replicated across the network, so if you lose a client’s data or you experience a data breach, the rest of the network can still see and verify that data.
Difference between cryptocurrency and blockchain
Like all new technologies, the two are being constantly compared and contrasted. Here are the main differences between cryptocurrencies and blockchain:
- Decentralization – Decentralization is the key feature that differentiates cryptocurrencies from traditional money systems. With a blockchain, the individual records are kept and verified by the entire network, not just the party who owns the records.
- No central authority – Unlike a central bank that keeps track of the entire world economy and has access to taxpayer funds, there’s no official entity responsible for managing and issuing a cryptocurrency such as Bitcoin or Ethereum. This means there are no “miners” or people who use computers to solve complex mathematical equations to verify and add new blocks to the blockchain. These functions are performed by the decentralized “computer” distributed across the network.
- IoT – As we’ve seen with the advent of the blockchain-based IoT devices, the technology is being increasingly implemented into everyday objects. For example, a home refrigerator may implement a blockchain to track food and inventory and send alerts to a central computer if there’s a problem.
Benefits of Using Cryptocurrencies
The use of cryptocurrencies offers a number of benefits over and above those associated with regular old money, including:
- No middleman: Because cryptocurrencies are decentralized, there’s no official authority handling or issuing them. These are held directly by the holders.
- No government regulation: Because cryptocurrencies are decentralized, there’s no official government regulation over the value of these assets.
- Ease of use: The decentralized nature of cryptocurrencies means they’re very easy to use. You can send and receive funds online with ease.
- Low fees: Because these are decentralized, there are no official fees charged by any party to facilitate transactions.
- Convenience: Because these are decentralized, you can send and receive funds without going to a bank or other financial institution.
Conclusion
The benefits of using cryptocurrencies are vast. They can be used as an investment, a store of value, and as a means of transfer of value. While there are still many unknowns about cryptocurrencies and how they work, it’s clear that they have a lot of potential for positive change and improvement in the world.
Depending on your needs and interests, one of these coins may be a perfect fit for you. But, regardless of your specific needs, it’s important that you understand the differences between cryptocurrencies and blockchain because they can help you make more informed decisions and make the best choices for your specific situation.