In spite of their recent rise to fame, few people actually understand the difference between “blockchain” and “cryptocurrency”.
To think of “blockchain” and “cryptocurrency” as the same thing is like saying… that a factory is equivalent to one piece of machinery. That simply is untrue.
Blockchain =/= Cryptocurrency
A simple analogy to help explain this concept:
You have a spreadsheet. Specifically, a shared ‘Google Sheet’ where multiple users can access and observe it. The catch? There are rules.
- There can only be additions to the spreadsheets. No changes or deletions allowed.
- Additions have to be verified.
- No one has full control of the spreadsheet (since it’s “shared,” remember?).
These are the rules that keeps blockchain secure. Every piece of information handled by blockchain technology is “locked-in” or “chained together” (Rule 1) and encrypted (Rule 2).
In-line with our analogy where a spreadsheet is capable of handling various types of functions from doing simple calculations to handling financial statements, blockchain technology has many uses too.
Blockchain: A distributed ledger of all transactions across a network, using encryption techniques, which allows participants to confirm transactions without a central clearing authority. The benefits of using this technology are increased (1) transparency, (2) accurate tracking, (3) permanent records and (4) cost reductions.
Cryptocurrency: A medium of exchange in the blockchain. Cryptocurrencies offers one way of maintaining the blockchain network, by incentivizing people called “miners” who get rewarded in cryptocurrency coins for verifying transactions and updating the blockchain. Blockchains can be sustained without cryptocurrencies if the network provides more benefit than the cost of running the network, in terms of computing power and server usage.
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