Blockchain and cryptocurrency are both important components of the ever-growing ecosystem of cryptographically managed and secured systems, but in spite of commonly being used as interchangeable terms, they are actually quite different concepts.
The name kind of says it all. A blockchain is a large database in which every transaction from every account is recorded. These transactions are recorded in blocks of certain sizes, which are numbered and placed in order. These blocks are then “chained” to one another, hence the name blockchain.
Furthermore, there are multiple copies of this ledger kept by different people, so if someone tries to make a modification to an old block, the change will not appear it into the master copy because most of the ledger owners have not consented to this. This “trustless” system requires that a revision proposal receive at least 51% of the computing power on the network in order for the change to be made.
Bitcoin and most other cryptocurrencies make use of these transactions to record financial exchanges, but many blockchains are not used to generate any currency, they just use their tokens as a means of establishing communication with networks.
Smart Contract deployment is another application which relies on the use of a blockchain. Smart contracts are a program which connects and interacts with the ledger. Their implementation can be used to automate certain functions on blockchains, from accounting processes to programs.
Certain blockchain, such as Ethereum and NEO, act like an operating system environment, offering a set of services that can be used in the development of decentralized applications.
Due to Bitcoin being the first significant implementation of a blockchain, many people automatically associate the coin with this technology. However, Bitcoin is just one of the thousands of cryptocurrencies that can be found on the market nowadays.
In order to be considered a cryptocurrency, the blockchain has to incorporate a form of issuable digital currency that can be distributed and exchanged. It’s not necessarily anonymous, though some, like Monero and Zcash, have been specifically created for this purpose.
Cryptocurrency is just one of the many applications of blockchain technology, this sector also presenting a wide diversity. Some cryptos work as exchangeable assets, such as Bitcoin or Litecoin, which serve as payment methods and store of value.
Some cryptocurrencies, such as tokens, are used to represent the value of an asset or utility. Any kind of value can be assigned to these tokens, ranging from products to loyalty points. There are also more types of tokens, the primary classes being security (asset), equity, utility, and payment tokens. Some of them represent an investment, a stock in a company, a payment method, or as a way of accessing certain services.
Blockchain Uses Beyond Cryptocurrency
Ultimately, blockchain as a technology is far less delicate than cryptocurrencies. It can be used in a wide range of diverse industry sectors, assisting the modernization process of many things and processes we use today. There are many examples that can be observed everywhere.
Any industry which needs a system that can offer swift information verification – which is basically, every industry – will be able to use blockchain’s immutability and transparency to verify data. One of the closest areas to creating a large-scale use for this type of blockchain is the supply chain industry, which makes use of digital tokens to represent items and shipments as they travel from their supplier to their final destination.
Unlike most crypto coins, many of these enterprise projects are conducted by big, established companies such as IBM, Maersk, WalMart, Dreyfus, the Royal Bank of Canada, and other businesses that prefer to develop more private, manageable technology rather than partake in the broader open-source environment.
There are so many applications to this technology that we would need another article to cover just the basics.
The cryptocurrency space is widely seen as volatile, as many projects are still under development. However, blockchains, in general, are rapidly gaining stability, with lots of research and development being invested in them by both big and small companies. The biggest obstacles that both technologies are currently struggling with is ease of use, but as more industries are starting to implement these technologies, in time they will become more accessible to the average consumer.