Whenever the word blockchain is used, cryptocurrency automatically comes to mind, and it’s true the other way as well. Many people believe that the two are synonymous and, thus, are often used interchangeably, but it couldn’t be more wrong. Cryptocurrencies are a type of money that use blockchain technology to operate.
In this detailed guide, you will learn about blockchain technology, how it works, and how cryptocurrency relates to it.
What Is a Blockchain?
Blockchain was first introduced with the debut of Bitcoin. Bitcoin was a cryptocurrency, and from then on, myths spread that blockchain and cryptocurrencies are the same.
Blockchain is a decentralized ledger that keeps the records of transactions, and these ledgers cannot be altered. So, once a transaction has been approved and included in a block, it becomes permanent. Now it will always exist in the blockchain. What makes blockchain technology different is that it is completely decentralized means there is no central authority that owns it or manages it. It is for consumers and belongs to them.
The data is saved on blocks. Each block is made up of a certain number of transactions. When a block is completed, the network approves it, and it is added to the blockchain, making it unchangeable.
What Is Cryptocurrency?
Cryptocurrency is made up of two words- crypto and currency. While the meaning of currency is clear that it is money, crypto means encrypted or written in codes. So, the meaning of a cryptocurrency is that it is a digital asset that has a value like money. It is created to foster easy exchange, and that’s where blockchain comes into the picture. All the crypto transactions that take place are recorded using blockchain technology.
The first ever cryptocurrency was Bitcoin, which became synonymous with blockchain. Since then, thousands of cryptocurrencies have entered the market.
How Blockchain and Cryptocurrencies Complement Each Other?
Cryptocurrencies and blockchain work together to create a chain of transactions that is decentralized, secure, and completely digital. There is no office, a warehouse where the servers are kept, or any other place where the operations are carried out. The similarities between the two are discussed below:
Advanced Technologies
Both blockchain and cryptocurrencies are advanced technologies that are still a matter of curiosity for many. The reason that there is no authority to supervise irks many. Cryptocurrencies are also an advanced technology that did not make sense when they made their debut. People were skeptical as to how they could undertake transactions using a type of money that didn’t exist physically. But today, they are widely accepted.
Intangible
Both the blockchain and cryptocurrencies are intangible. There is no server or computer from which you can access the entire data. Thus, there is no blockchain ownership as it is a distributed ledger. The same goes for cryptocurrency because it is so unlike a fiat currency. You can’t touch or hold it physically.
Interdependent
Blockchain technology was created to support Bitcoin. Or it can be said that if there had been no blockchain, Bitcoin would not have come into existence. Thus, blockchain is the foundation for cryptocurrency. Both technologies are interdependent.
Blockchain Use Cases Other Than Cryptocurrency
While Cryptocurrencies are highly dependent on the blockchain, blockchain has a reach far beyond cryptocurrencies. It can be used in several innovative ways, such as.