Blockchain technology and cryptocurrency seem to be drawing a lot of attention these days especially among users who want to capitalize on the volatility of the market to make profits. Despite the popularity of blockchain and cryptocurrency, users of the technology do not know what they are and most people often conflate the two. This may be as a result of the very first blockchain platform and cryptocurrency created.
This article will take us briefly through both terminologies, what they are, and the differences between them without involving so much technicality.
What is blockchain?
A Blockchain is an immutable database that stores any type of information in a decentralized, i.e. in a way that makes it difficult for the information to be hacked or tampered with.
It is an immutable distributed digital ledger of transactions that is duplicated across multiple networks of computers. To fully understand this, let’s quickly take a look at what a ledger is.
A ledger is a book or collection of accounts in which account transactions are recorded.
Thus, by saying blockchain is an immutable distributed ledger of transactions, we mean it is a digital ledger that stores data on a distributed network of computers in different locations across the globe in a way that it cannot be hacked, changed, or tampered with.
The distribution of this data to the various network of computers at different locations makes blockchain decentralized, i.e. data is not in the custody and control of a central authority.
The immutability and decentralization of the blockchain make it very unique.
The immutable nature of blockchain means you can always trust the system to be accurate at all times while the distributed nature makes it decentralized.
Decentralization makes the blockchain secure against network attacks as the blockchain itself is being secured by several networks of computers operated by different users in different locations. This makes it difficult to hack or tamper with as there is no central authority to control things.
Meaning of cryptocurrency
Cryptocurrency on the other hand is digital money or currency that can be used for exchange for goods or services without involving any third party.
Digital money or currency is any means of payment that exists electronically. It is not physical like a Naira or dollar note. It cannot be held and can be transacted only via digital or electronic means.
A brief history of blockchain and cryptocurrency
It is hardly possible to talk about blockchain without mentioning cryptocurrency, its first real-life use case.
The history of blockchain can be traced as far back as 1982 when cryptographer David Chaum proposed the first blockchain-like protocol. Later in the year 1991, Physicist Stuart Haber and cryptographer W Scott Stornetta released a research paper with the title, ‘How to time stamp a digital document’.
It wasn’t until decades later that we had the first blockchain network and Bitcoin, the first cryptocurrency, built. We do not know if it’s a person or a group of persons that launched the first blockchain network and its first real-life application, ‘Bitcoin’, the first cryptocurrency back in January 2009 because he(they) chose to be anonymous. What we do know is that the pseudonym Satoshi Nakomoto has been ascribed to the inventor(s) of the first blockchain network.
The difference between a blockchain and a cryptocurrency
If you have been following this write-up from the start, recall that I earlier said a lot of people often conflate the two, are you one of them? If you are, you are about to know the difference between blockchain and cryptocurrency.
Blockchain and Cryptocurrency are not the same. However, they are closely related but they are still very different.
Blockchain is the technology that makes it possible for a cryptocurrency to function, i.e. without a blockchain, we cannot have a cryptocurrency.
A blockchain does not need a cryptocurrency to exist or perform its operation but cryptocurrency is always dependent on the blockchain.
Cryptocurrency is just one of the many possible use cases of blockchain technology. As earlier said it is the first real-life use case of blockchain technology.
Examples blockchains and their Cryptocurrencies
Most Blockchain platforms usually come with their own native cryptocurrency. Bitcoin is the very first and most popular cryptocurrency in the world runs on its own blockchain, ‘The Bitcoin Network’.
Many people know about Bitcoin but do not know about its native blockchain which makes it possible for Bitcoin to operate.
Other examples include:
• Ethereum blockchain and its native Ether token(ETH), the cryptocurrency that runs on the blockchain.
• Solana blockchain and its native solana token(SOL) which is the cryptocurrency that runs on the blockchain.
• Cardano network and its ADA token, its native cryptocurrency.
• The Stellar block chain and its XLM, its cryptocurrency.
In a nutshell a cryptocurrency is built on a blockchain. Blockchain is like a piece of land we can use for different purposes.
We can build houses, construct roads, hospitals, schools and so many other constructions on a piece of land.
Cryptocurrency, on the other hand, is like a house built on a piece of land. Without the house, the land can exist but a house cannot be built without land.