Are you aware that blockchain technology and cryptocurrencies are not synonymous? You’re not alone if you’ve been using the terms interchangeably; many people are, owing to the near relationship between blockchain technology and cryptocurrency. To make matters worse, marketing efforts often use ambiguous terminology, causing even more frustration for those who are unfamiliar with the industry’s jargon.
There is a significant difference between the two, and that will have a significant impact on whether or not you can participate in a project.
What Is Blockchain?
A blockchain, to put it simply, is a database file used to store records. To put it another way, it’s a transparent, distributed ledger (database), which ensures the information stored in the blockchain is distributed (duplicated) through several machines and hence decentralized.
All of the aspects that make blockchain so revolutionary is its decentralization. Unlike a standard, centralized database, where documents are handled by a single central authority (such as a corporation or government), the blockchain is completely open, with data validated by the user agreement. Given their openness, blockchains are extremely safe. Since there is no one central point of attack for hackers to exploit, this is the case.
But doesn’t this, you know, sound like bitcoin?
Well, you aren’t exactly wrong, it’s because Blockchain is the technology that underpins Bitcoin and was created with Bitcoin in mind. So, Bitcoin was the first example of blockchain in operation, and Bitcoin does not exist without blockchain. As a result, the two names are sometimes used interchangeably.
However, this does not imply that blockchain and Bitcoin are synonymous.
Bitcoin is a decentralized digital currency, or peer-to-peer electronic payment system, that allows users to send bitcoins anonymously without the involvement of a third-party authority (like a bank or government). However, Bitcoin is just one form of cryptocurrency; blockchain infrastructure often powers several cryptocurrency networks. So, while Bitcoin trades digital currencies using blockchain technology, blockchain is more than just Bitcoin.
Here’s a simple way to think of the distinction:
Imagine you go to a video game center. You go into the building and trade your money for chips. These chips may be used to play the games inside the video games center, but they have no buying value outside of the establishment.
The chips, in this case, are cryptocurrency coins, and the video game center is the blockchain network that provides an infrastructure of players and allows coins to be played and transacted.
Blockchain is a kind of distributed ledger that keeps track of and connects transactions.
The parties in the transactions are the senders and receivers. Miners are members of the network that verify transactions. They earn the right to build the next block and check the transactions that make up the block if they solve a mathematical problem the fastest. They’re provided whatever kind of cryptocurrency is being used on the blockchain network as reimbursement — bitcoin, for example.
At the protocol stage, this is a cryptocurrency. Other application coins, known as ‘tokens,’ are used for software developed on top of a blockchain, such as Ethereum. They serve as the application’s currency and are used to conduct transactions.
When you compare this model to anything like Facebook, you’ll understand why it’s important. Early users and developers who contributed games and functions to Facebook improved the platform’s appeal, but they were never paid for it. They may have received some monetary incentives, but they were unable to share in the benefits that Facebook had to offer. The corporation and its owners benefited from the increased value.
The coins get more important as more users use the website. If their popularity rises, so does the creator’s willingness to add more functionality, as well as the developer’s incentive to keep working on the app.
The first framework based on blockchain technologies is cryptocurrency.
This is the source of the bulk of misunderstandings.
People consider bitcoin and other cryptocurrencies interchangeable with blockchain because they were the first use cases for blockchain. In fact, the various coins are only one example of blockchain technology in action.
Because of their speculative appeal, coins have been brought to the attention of the general population. Many people see bitcoins as investing opportunities, particularly because the price of bitcoin skyrocketed last year. However, there are problems with the speculation.
Looking at the wider applications of blockchain
Since blockchain and Bitcoin are very closely connected, it took a long time for people to realize that blockchain can be used for more than cryptocurrency networks. Indeed, the promise of blockchain is so great that many people think it would revolutionize the way we do business, just as the internet did before it.
Below are a few examples of blockchain’s broader implementations outside of Bitcoin and other cryptocurrencies:
Putting smart contracts into action. We all know the blockchain is perfect for enabling crypto transactions thanks to Bitcoin, but smart contracts can also be used to formalize digital relationships. A smart contract allows electronic payments to be released after the contract terms have been met, saving time and potentially reducing discrepancies or resolving disagreements.
Maintaining a collaborative, open record-keeping scheme. The perfect solution for keeping a long-term, stable, and open database of properties (land rights, for example) that both parties can access safely is blockchain.
Supply chain auditing Users may use blockchain to monitor the ownership of products all the way back to the source. De Beers, a diamond firm, has begun to use blockchain to track diamonds from the mine to the end customer as an example. Anyone who wishes to ensure that their diamonds are conflict-free will have access to a clear and comprehensive record.
Providing evidence of insurance coverage. The Nationwide Insurance Corporation intends to use blockchain technology to provide proof-of-insurance data. The tool will enable police officers, agents, and clients to quickly check insurance coverage, potentially speeding up the appeals process.
To wrap it up, here’s why blockchain and cryptocurrency are two entirely different things:
- Blockchain is a distributed database, while cryptocurrency is a digital currency.
- Cryptocurrency is fuelled by blockchain, while blockchain has a wide range of applications.
- Anonymity is promoted by cryptocurrency, while transparency is promoted by blockchain.
- cryptocurrency is used to move money between users, while blockchain can be used to transfer anything from details to land ownership rights.
Now that you’ve got the run, the next step is to figure out how to learn Blockchain technology. This necessitates the creation of further blockchain platforms and blockchain professionals, as well as an increase in the number of people interested in learning how to construct blockchains. Since there’s a high demand for cryptocurrency experts getting a good cryptocurrency certification is a deal well done. They being both short-term and versatile, cryptocurrency certification courses are a popular option.