Blockchain and cryptocurrencies are two terms often used interchangeably. However, there is a big difference between the two. Cryptocurrencies are digital currencies that use blockchain as a ledger for storing records of crypto transactions. However, blockchains have many uses beyond cryptocurrencies, including storing and accessing medical data, supply chain and logistics information, and financial records.
What is Blockchain?
A blockchain is a collection of records or an electronic database, like a spreadsheet. A blockchain holds larger amounts of information, such as cryptocurrency transaction records, stored in “blocks” or groups, unlike a regular spreadsheet.
These blocks are distributed across multiple computers or a “distributed ledger.” Once each block reaches its storage limit, it is “chained” to a block filled previously, and a new block comes into use.
What is Cryptocurrency?
Cryptocurrency is digital money with market value like other currencies. Cryptocurrencies can also be used as a store of value like gold. The first cryptocurrency was Bitcoin which pioneered blockchain technology.
Subsequently, other cryptocurrencies, such as Ether, came up with their own blockchains (known as Ethereum).
Similarities Between Blockchain and Cryptocurrency
Both blockchain and cryptocurrencies are intangible. Cryptocurrencies are intangible digital tokens, which you cannot hold physically like the US dollar or the Indian rupee. The blockchains used for storing cryptocurrencies do not exist in a single place or one physical data centre.
Both blockchain and cryptocurrencies are technological advancements. Blockchain is the underlying technology behind cryptocurrencies. Blockchain is much more advanced and secure than traditional databases. Cryptocurrencies are technologically advanced than physical or paper-based currencies.
Blockchain came into existence to record transactions of bitcoin, the world’s first cryptocurrency. All major cryptocurrencies have blockchains for recording transactions. If someone buys a new bitcoin, it is recorded in a bitcoin blockchain.
Differences Between Blockchain and Cryptocurrency
Blockchain is a storage technology used for saving data on decentralized networks. Cryptocurrency is a medium of exchange like the US dollar. A blockchain can be used for storing different types of information beyond cryptocurrency transaction records.
All cryptocurrencies have a monetary value. You must have heard of Bitcoin hitting a high of 65,000 dollars (around 48 lac rupees) or Ether reaching 4,000 dollars (about 3 lac rupees). A blockchain does not have any monetary value.
Blockchain technology has uses beyond cryptocurrencies. Blockchain can be used for recording transactions in banking, healthcare, supply chain, and retail. Cryptocurrency is digital money, which can be used for buying goods and services and for investment.
Blockchain technology is decentralized and distributed all over the world. There is no single location where all records of a blockchain are stored. Cryptocurrencies, although held in blockchains, can be accessed via mobile wallets. If you have a bitcoin wallet, you can use it anywhere for transacting with parties accepting bitcoins.
Blockchain, being a public ledger, is highly transparent. Anyone can join a blockchain network and view the information available. On the other hand, cryptocurrencies offer anonymity. So, while anyone can see the source/destination of a bitcoin transaction, no one can know who is behind the transaction.