Estimated reading time: 3 minutes, 26 seconds
In this episode of WTF is, we cover the difference between cryptocurrency and blockchain technology.
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.
The term blockchain developed from “chain of blocks,” and cryptocurrency is a “cryptographic currency.” However, the fundamental difference between these concepts has to do with how distributed ledger technology is used. So first and foremost, let’s get into what is a blockchain.
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.
So when someone asks you, “What the fuck 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.”
To learn more about blockchain technology in depth, head over to our full guide and video.
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.” Although all are considered cryptocurrencies, 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. On the other hand, other projects, like Ethereum, use differentiating terms. In this example, Ethereum is the blockchain technology, and Ether is the token.
To learn more about cryptocurrency, check out our video and guide here.
Difference between cryptocurrency and blockchain & how they work 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. Furthermore, 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 part of the ecosystem. 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.
To read our in-depth guide on the differences between cryptocurrency and blockchain, head to our full guide page!
If you want to dig deeper into blockchains specifically or cryptocurrencies specifically, definitely check out our individual videos on each. The links are below!
WTF IS is our series where we explore some of the most frequently asked questions about blockchains, cryptocurrencies, and the technology surrounding these fields. Looking to get acquainted with blockchain? Then WTF IS is the perfect series for you!
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