You may have noticed that a lot of people throw the terms blockchain and cryptocurrency in the same breath often. This can often make it confusing for most people as to what these two terms actually mean. Are they the same thing, or do they represent two different things?
What is a Cryptocurrency?
A cryptocurrency is basically a digital currency. It’s a digital version of a traditional fiat currency, and it operates exactly like that. Cryptocurrencies can be mined, purchased, or traded, and there are many different types of currencies in the world. The most common and popular cryptocurrencies in the world include Bitcoin and Ethereum. Cryptocurrencies have been around for several years now, and they’re a moderately popular form of investment. Most cryptocurrencies are fiat meaning that they aren’t backed by anything, although some cryptocurrencies, known as stable coins are backed by real-world assets. So there is a lot of diversity when it comes to cryptocurrencies.
What is Blockchain?
Blockchain is a type of open, decentralized, and distributed computer database. It is essentially a means for transferring data, and the fact that it’s decentralized is one of its most important features. Blockchain is extremely effective and very secure despite being an entirely decentralized system. Blockchain is also basically the technology that underpins the entire use of cryptocurrency. Blockchain is used for cryptocurrency transfers since it is extremely effective for transparent communication and secure payments. So, blockchain is basically just a computer database system. The difference between it and cryptocurrency is that cryptocurrency is the name of the digital currency while Blockchain is the technology that’s used to underpin it.
Additional Uses of Blockchain
Apart from cryptocurrencies, blockchain also has a number of other uses which are primarily related to the secure nature of the technology and its practical nature. Here are a few of the different uses that blockchain has apart from cryptocurrency:
1. Smart contract execution
Blockchain is one of the best ways to conduct formal digital contracts and conduct transactions. Smart contract execution is especially beneficial through blockchain since it is one of the best ways to execute smart contracts because of the secure nature of the technology.
2. Recordkeeping
Blockchain can be very effectively used for maintaining records of assets and other information. Since it is highly secure, it can be used very effectively for using offering record access to multiple different people.
3. Supply Chain Auditing
Since blockchain allows users to maintain records and information to different parties involved in a transaction. Blockchain has been used by many different companies for managing their supply chains include the De Beers Diamond company.
4. Insurance Proof
Many insurance companies across the world have opted to use blockchain technology for verifying insurance claims since it is an extremely effective technology.
So What are the Differences between Cryptocurrencies and Blockchain Technology?
Essentially, cryptocurrencies are a digital version of national currencies, but blockchain technology is the technological basis that’s used to underpin cryptocurrency transactions. Cryptocurrency works entirely on the basis of blockchain and it cannot be used without blockchain technology.
On the other hand, blockchain technology can be used for a number of other functions all related to providing safe and proper transactions and record-keeping for different purposes. Blockchain is used for other different purposes due to the very secure and effective nature of the technology.
In conclusion, cryptocurrency and blockchain are two highly related technologies, but the difference between the two is that the former is a digital currency while the latter is the technology used to underpin it.