Blockchain technology often gets conflated with cryptocurrency. This is because cryptocurrency is built upon blockchain technology. Often, ‘blockchain’ becomes synonymous with ‘Bitcoin’. While some people are becoming more aware of the differences, many are still lack clarity into blockchain, and for good reason.
In this week’s ‘Blockchain, Explained’, we look at the difference between blockchain technology and cryptocurrency and why they shouldn’t be confused with one another.
What is cryptocurrency? How does it differ from blockchain?
A cryptocurrency is a digital asset that is secured by cryptography, making it difficult to counterfeit. Cryptocurrencies use blockchain technology, which is a distributed ledger enforced by a disparate network of computers.
Fundamentally, blockchain enables the existence of cryptocurrency.
Cryptocurrency is outside of the traditional bank and completely decentralised. This has given it a sour reputation, with its potential use in crime.
While cryptocurrency is fairly limited in its usability (mostly, it can only be utilised as a financial asset), blockchain has a large array of potential.
These are just a few ways we can utilise blockchain technology.
What are the main uses of cryptocurrency versus blockchain?
The primary use for cryptocurrency is in financial exchange. It serves as a financial asset that can be bought, sold, or earned. Some examples of cryptocurrencies are Bitcoin, ETC-20 (Ethereum), Litecoin or Ripple.
A cryptocurrency is fundamentally a virtual currency, secured by cryptography, that is distributed across a large number of computers and exists outside of government and central authority control.
Blockchain, on the other hand, is a decentralised ledger technology that is secure and acts as a database. It can be public or private, permissionless or permissioned, and has even been implemented by many governmental organisations.
Unlike cryptocurrency, which still remains largely misunderstood and insecure in common circles, blockchain has potential and scalability, delivers control to the user, and has uses far beyond finance.
Other than the uses listed above, blockchain may also be used for company data tracking such in the case of supply chains or fuel tracking, allocation of copyright, bullion tracking, or even secure storage of personal identifying data.
Blockchain has immense potential across a variety of areas and will provide data insights that go far beyond financial asset exchange.
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