Blockchain and crypto are some big words being thrown around more and more recently. Blockchains and cryptocurrencies kind of go hand in hand with one another, but they do have some big differences too.
Part of the confusion around what is blockchain versus what is cryptocurrency is due in part to the terms that have come into use. Instead of being introduced by formal definition, the term blockchain developed from “chain of blocks.” Cryptocurrency is a sort-of portmanteau of “cryptographic currency.” But the fundamental difference between these concepts has to do with how distributed ledger technology is used. Our video gives you the run down!
The term blockchain developed from “chain of blocks,” and cryptocurrency is a “cryptographic currency.” But the fundamental difference between these concepts has to do with how distributed ledger technology is used. So first and foremost, lets get into what a blockchain is.
What is a blockchain?
A blockchain is a distributed ledger technology that forms a “chain of blocks.” Each block includes information and data that are bundled together and verified. These blocks are then validated and strung onto the chain of transactions and information in previous blocks. These blocks of transactions are permanently recorded in the distributed ledger that is the blockchain.
Each block contains the transaction information, as well as a timestamp, and connects to the previous block—hence the name: block-chain. (For more information on the distributed properties of these networks, check out our What is Decentralization page).
This is a very basic explanation of what blockchain technology is, and this does not get into the potential functionalities of these systems, and implications for how we can abstract these ideas to create more useful functions.
So when someone asks you, “what the f*** is a blockchain?!” You can tell them a simple explanation:
“Blockchain is a chain of information, held over a distributed network, with a timestamp that cannot be altered once it’s been recorded.”
So, what is cryptocurrency?
Cryptocurrency can be seen as a tool or resource on a blockchain network. It is a token based on the distributed ledger. Cryptocurrency is a digital currency formed on the basis of cryptography, or by definition, “the art of solving or writing codes.” These tokens can serve different purposes on these networks.
One can consider cryptocurrency as a type of asset class, that can be used for multiple purposes and has value through it’s utility function (a native token) or as an asset-backed piece of value (an asset-backed token).
In some cases, the blockchain technology and the cryptocurrency are referred to by the same name. This is the case with Bitcoin. A capital B signifies the blockhain, and a lower case b in bitcoin is the token. Other projects, like Ethereum, use differentiating terms. Ethereum being the blockchain technology, and Ether being the token.
Main differences between the two & how they go together
Blockchain is the platform which brings cryptocurrencies into play. The blockchain is the technology that is serves as the distributed ledger that forms the network. This network creates the means for transacting, and enables transferring of value and information.
Cryptocurrencies are the tokens used within these networks to send value and pay for these transactions. You can see them as tool on blockchain, in some cases serving as a resource or utility function. Other times they are used to digitize value of an asset.
Blockchains serve as the basis technology, in which cryptocurrencies are a by product of. They go hand-in-hand, and crypto is often necessary to transact on a blockchain. But without the blockchain, we would not have a means for these transactions to be recorded and transferred.
For more information on how these two go together, check out our guide page, where you can read up more on blockchain and cryptocurrencies.
If you liked this, we have lots of other information resources for you!
- WTF is cryptocurrency?
- What is a blockchain?
- What is decentralization?
- Popular Token Projects
- How to buy
If you enjoyed this video, please give us a “Like.” Don’t forget to subscribe to our channel so you don’t miss out on any of the blockchain buzz!
Interact with us on social media and sign up for our mailing list!: