Every time the word blockchain is mentioned, cryptocurrency comes to mind. Many people think the two are synonymous, and they are used interchangeably. But it’s not so. Cryptocurrencies, a type of money, use blockchain technology to run.
This comprehensive guide will help you understand blockchain technology, its workings, and the relationship that cryptocurrency has to it.
What is a Blockchain and How Does It Work?
Bitcoin’s debut was the first to introduce blockchain. Bitcoin was the first cryptocurrency. There were many myths about how blockchain and cryptocurrencies were different.
Blockchain is a distributed ledger that records transactions. They cannot be altered. Once a transaction was approved and placed in a block, it becomes a permanent record. This means that it will be available in the Blockchain forever. Blockchain technology is unique in that it is not controlled or managed by a central authority. It belongs to the consumers.
The data are saved in blocks. Each block contains a limited number of transactions. The network approves a block when it’s complete. It is then added to the Blockchain, making it irrevocable.
What is Cryptocurrency exactly?
Cryptocurrency consists of two words, crypto and currency. While currency means money, crypto is written in codes or encrypted. It is a digital money that has a similar value to currency. It’s created to encourage easy exchange and blockchain is a part of that. Blockchain technology records all crypto transactions.
Bitcoin, the first cryptocurrency, was created. This coin became known as blockchain. Since then, thousands upon thousands of cryptocurrencies has entered the market.
How Blockchain & Cryptocurrencies Combine?
Together, cryptocurrencies, blockchain, and other digital currencies create a network of transactions that is decentralized and secure. There are no offices, servers are not stored in a warehouse, and there is no other place for the operations to be carried out. Below, we will examine the similarities between these two.
Both blockchain technology and cryptocurrencies are fascinating technologies that remain unexplored by many. Many find it annoying that there is no authority to regulate. It is also an advanced technology, which made it difficult to understand when cryptocurrencies first appeared. Some people were skeptical that they could use a currency that doesn’t exist in real life to make transactions. Today they are well-accepted.
Both the blockchain, and cryptocurrencies, are intangible. There is no way to access all the data except from one computer or server. Because it is distributed, there is no way to own the blockchain. This is true for cryptocurrency as it is very different from fiat currencies. It can’t be touched or held physically.
Bitcoin was first supported by blockchain technology. Or, you could say that Bitcoin would never have existed if there was no blockchain. Therefore, blockchain is the foundation that allows cryptocurrency to exist. Both technologies can be interdependent.
Blockchain Use Cases Other than Cryptocurrency
While cryptocurrencies rely heavily on blockchain technology, blockchain can also be used in ways that are not limited to cryptocurrencies. It can be used in many innovative ways, including.
To Ease Transfer and Exchange
Blockchain will make the financial sector more efficient. The financial sector’s purpose is to facilitate easy transfers. Traditional banking methods are slow and time-consuming. Blockchain transactions are more efficient, faster and safer. You can also transact with your friends and family directly without the use of intermediaries such banks. The transaction records are permanent and can be reversibly reopened at any time. This increases security and transparency.
Decentralized blockchain technology means that hackers can’t target just one point. Blockchains provide the best data storage because it is distributed. It’s also easy to trace unauthorized changes.
The most recent blockchain technologies have created smart contracts that are transparent and self-executing. These smart contracts track the terms of the agreement and execute automatically when they are fulfilled. These smart contracts are versatile and can be used to cut down on business expenses.
NFTs or Non-fungible tokens are becoming very popular due to their uniqueness. They show ownership of an asset. This could be an art piece or a digital asset like coins. They are often used in metaverses and have a new identity. They are also Blockchain-based.
Blockchains are transparent and can be used for sharing records across industries to expedite processing. For example, insurance companies can quickly access patient records in cases like health insurance. Insurance companies can process claims faster because all data on the blockchain are verified.
Elections are frequently labelled fraudulent. Regardless of how advanced the technologies used, there is always doubt as to their authenticity. Blockchains can help to eliminate this. A blockchain-enabled electoral system will make it impossible to commit fraud or alter voter records. Additional benefits include instant results.
Blockchain Technology Does Cryptocurrencies Have a Future?
Bitcoin, the first ever cryptocurrency, was built on blockchain technology. Although they became very popular, the question of whether cryptocurrency can be used without blockchain technology has always been raised.
All new cryptocurrencies have started to use blockchain technology. Blockchain technology is being used by most cryptocurrencies even today.
But this doesn’t ensure that these two technologies will continue to be integrated in the future. IOTA is one such cryptocurrency, which is not blockchain-based. It’s instead based upon a mathematical concept called Tangle, and it has already made a splash. Reason? Its owners claim it will outperform Bitcoin in speed and performance.
It is only the beginning a new era, where blockchain and cryptocurrency can be transformed in ways unimaginable. This will have unforeseeable consequences for the future.