Two of the most important terms to know in the world of crypto investing is that of blockchain technology and cryptocurrency itself. It’s easy to get things mixed up, especially if you aren’t completely familiar with how the process works. So what exactly is the difference between blockchain technology and cryptocurrency?
While blockchain technology is the system that supports the use of cryptocurrency, cryptocurrency itself is what you use to buy, sell, and trade. It may be easy to mix these two terms up, but knowing which one is the platform and which one you actually use is important in ensuring success.
In this article, we’ll break down what each term is and how they work. We’ll also go into more detail about how each is related to the other. By the time you’re done reading, you should have a good idea of how to differentiate the two terms.
What is Blockchain Technology?
Blockchain technology is a distributed database that is shared within nodes of a computer network. A blockchain database stores information digitally and is a crucial part in the operation and circulation of cryptocurrency and crypto exchange. In short, cryptocurrency could not run the way it does successfully without the use of blockchain technology.
This technology allows crypto exchanges to run decentralized and mostly unregulated without compromising the security of those who use them. The primary difference between blockchain technology and other databases is that blockchain collects information in blocks that close and link to other complete blocks when they reach their informational capacity.
The primary goal of blockchain technology is to record digital information without any of the information being edited. The connected blocks in the ledger contain unique individual transactions that are verified independently by all members of any given network.
Although blockchain technology is primarily used in cryptocurrency trading and investing, it can also be adopted into several other industries. For example, financial institutions may adopt blockchain technology to lower costs and streamline the processing of payments.
What is Cryptocurrency?
Cryptocurrency is a digital currency that is made secure by the use of cryptography. Cryptography is referred to as the study of secure digital communications in the form of encryption.
Cryptocurrency is most commonly circulated through crypto exchange platforms that use blockchain technology. New cryptocurrency is circulated through the exchange through mining. Crypto mining is the process in which miners solve incredibly complex mathematical equations with sophisticated computer technology. This process takes a significant amount of time and energy, so not everyone who delves into cryptocurrency tries their hand at crypto mining.
The most popular forms of cryptocurrency among beginners are Bitcoin, Ethereum, and Dogecoin. Bitcoin is considered the “OG” of the cryptocurrency world as it’s what started the trend of using digital currency in the first place.
Bitcoin was created in 2009 by Satoshi Nakamoto, a pseudonym for a person or group who still hasn’t been discovered to this day. Bitcoin is generally the first cryptocurrency a beginner will start out with.
Ethereum is considered the second-largest cryptocurrency in circulation and actually serves as a crypto exchange platform and a system where you can purchase apps and games too. Dogecoin, unlike the other two here, was originally created due to the viral doge meme from years ago. It blew up in 2021 after a group of Redditors decided to troll the system and has become popular amongst newcomers who want to be “a part of the meme.”
Blockchain Technology vs Cryptocurrency - How Are The Two Related?
In short, cryptocurrency wouldn’t be able to function the way it does without blockchain technology. Because this type of technology is what allows cryptocurrency to function unregulated and decentralized, the elimination of blockchain usage would force crypto users to come up with an entirely new infrastructure.
However, while cryptocurrency can’t exist without blockchain technology, blockchain technology can be used in other industries. In fact, financial companies like JPM are toying with the idea of adopting blockchain technology into their practices.
Parting Thoughts on Blockchain Tech
As easy as it may be to mix up terms when it comes to cryptocurrency and investing, it’s important to know the difference and use each term correctly. This shows that you know and understand everything you’re talking about and it keeps you and others from becoming confused during the process.
To help you remember, it’s good to remind yourself that cryptocurrency is what you use and blockchain technology is the system behind crypto that allows you to use it as you do.
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