Understanding The Relationship Between Cryptocurrency And Blockchain
Cryptocurrency and blockchain are two different technologies that we often hear being used together because of the close relationship they have with one another. While the two terms tend to confuse a number of people, they’re not the same thing.
If you intend on investing in cryptocurrency soon enough or are simply keen on getting explicit knowledge of how these two terms work together, then, like using MLB team stats to benefit your bets, you’ll want to know the facts before making any hasty decisions and conclusions.
Blockchain: An Overview
Blockchains are a technology that store data and transactions. Each block within the chain consists of a special and unique piece of information or data. The blocks then come together to form a complete chain that works like a large digital ledger to store this data chronologically.
When Satoshi Nakamoto invented this technology, the name he gave his blockchain was Bitcoin. Because Bitcoin also happened to be the term used to name the Bitcoin cryptocurrency, this is where the confusion began because people began assuming that blockchains were another word to describe cryptocurrencies.
After the massive crash of economies that took place in 2008, the world developed a sudden mistrust for banks and sought to look for another form of exchange that wouldn’t get lost. At the time, the world was truly against the use of banks since thousands of people had lost everything they had due to the economic crash.
It was at this time that Bitcoin began introducing itself to people around the world, and it’s here that it started showing lots of potential to be a new bank-proof currency that people could rely on.
After Bitcoin launched, its success propelled many other blockchains to follow, like Ethereum and Ripple, and this made blockchain even more sophisticated. This later showed the world that blockchains could have various aspects to them, like the ability to store data. Today, people are virtually limitless when it comes to what they can do with blockchain technology, especially when we look at how well it’s doing today.
Blockchain Features Worth Taking Note Of
As it stands, blockchains have four key features to them and they include the following:
- They are decentralized, meaning no one can manipulate or modify them enough to change how they should perform.
- They use a distributed ledger to help prevent cases of fraud, making them a lot easier to manage and handle.
- The minting of coins is quite a typical case, meaning you can think of mining Bitcoin as something associated with coin minting.
- They help create a tamper-free ecosystem.
Cryptocurrency: An Overview
When we now shift our focus to cryptocurrencies, this is something completely different from blockchains. Simply put, cryptocurrencies act like the asset that blockchain technology use. Some refer to it as the network’s money, but technically speaking, people also refer to it as a token.
This is despite there being some blockchains that don’t make use of tokens within their ecosystem; however, these are typically referred to as tokenless blockchains. An excellent example of this would be when we look at what would happen to Ripple if it were to operate without its coin, XRP.
How Traders And Investors Can Own Cryptocurrencies
If you intend on owning a cryptocurrency or are looking into buying only a fraction of one, then there are two primary ways that you can use to go about it. You have the option to:
- Mine the currency yourself with the use of your electrical and processing power
- Purchase the digital currency from a trusted cryptocurrency exchange center
Cryptocurrency Features Worth Taking Note Of
Here’s a list of common properties or features that come with cryptocurrency. They include the following:
- Cryptocurrency transactions are irreversible, meaning that once the transaction has been made, it cannot be reversed or canceled.
- Cryptos are pseudonymous
- All crypto transactions are fast and secure.
- You do not need to request permission each time you send or receive funds from someone.
- Its market supply operates under strict control since cryptocurrencies are limited in number.
- Cryptocurrencies operate on an IOU system, eliminating debts by all means.