When you’re new to the cryptocurrency and blockchain world, things can feel a little bit overwhelming. There’s quite a lot of jargon, and sometimes all that “tech” stuff can just fly over your head. Don’t worry though, we’re here to help! We’ll be examining the key differences between the two technologies, so you can get on top of all jargon in the crypto sphere. Cryptocurrency and blockchain: same same but different?
What is cryptocurrency?
A cryptocurrency is a digital asset that works as a medium of exchange. Cryptocurrencies can be used for an almost endless number of things, from cross border transactions, to trading, and investments. Cryptocurrency is far more secure than fiat currency (pounds, dollars etc), as it works off of strong cryptography and a decentralized digital ledger called a blockchain.
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Cryptocurrencies function outside of a central governing agency like a bank or a government. The very first cryptocurrency invented was Bitcoin (BTC). Satoshi Nakamoto released his whitepaper, “Bitcoin: A Peer to Peer Electronic Cash System”, detailing how the cryptocurrency would work, its purpose (it was a response to crash of the global financial markets in 2008), and what it would run on – blockchain technology.
What is a blockchain?
A blockchain is a digital ledger that is made up of blocks, linked using cryptography. A blockchain is a system where transactions made in bitcoin, or other cryptocurrencies, are recorded in a ledger that is maintained across various computers in the ecosystem. These computers are called miners, and they verify all of the transactions that take place on a blockchain, building blocks to add to the network.
Blockchains are generally thought to be inherently linked to cryptocurrency, but that just isn’t the case. Rather, cryptocurrencies are built on blockchains, which have endless uses outside of hosting a cryptocurrency.
For example, depending on the blockchain, you can:
- Verify transactions
- Consume content
- Certify a supply chain
- Prove your identity
- Share electricity with neighbors
- Prove ownership of an asset
- Issue shares
- Create smart contracts (Ethereum)
And that really is just the tip of the iceberg.
Key Differences between blockchain and cryptocurrency
So, are cryptocurrency and blockchain same same but different? Let’s look at some of the key differences.
|What it is||A cryptocurrency is a digital asset.||A blockchain is a digital ledger that hosts the cryptocurrency and verifies transactions.|
|Main aim||To simplify, speed up, decentralize, and secure the process of transacting with money outside of a central authority.||To verify those transactions, and provide a low cost and secure environment for peer-to-peer transactions.|
|Trade||Cryptocurrencies are limited to trading as a currency.||Blockchains can easily support the trade of stocks, currencies, or even property rights.|
|Scope||The scope of cryptocurrency is fairly limited to transactions and stakeholding (in the form of ICOs), although this is changing as advancements are made in the industry.||The scope of blockchain is much more far-reaching, and is virtually limitless in its capacity for expansion.|
Blockchain and cryptocurrency: working together
Blockchain and cryptocurrency: same same but different? Ultimately, the two technologies are intertwined. However, it’s still crucial that you understand the difference between the two, as their functions are incredibly different. Blockchain works as the network that a cryptocurrency functions on, and a cryptocurrency is (in basic terms) a digital asset that works as a mode of transacting. Understand the difference between them, and you’re already on your way!
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Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework. Your capital is at risk.
A global, neutral payment network that allows anyone on earth to transact a huge or tiny amount of value with anyone else within minutes, without needing to ask permission from a government, without disclosing one’s personal information, and without the possibility of censorship.
— Alex Gladstein (@gladstein) June 2, 2019