Blockchain Vs Cryptocurrency Why do we need them both ?

Cryptocurrency is a digital currency that is secured using cryptography technology. Blockchain is the fundamental technology that enables the existence of cryptocurrency.

A cryptocurrency is a form of money which represents a value in exchange markets. So, it is a tool for virtual exchanges. But, a blockchain is not a tool. It is a technology that helps to record the transactions which occur in such markets. A cryptocurrency is a form of exchange while the blockchain is used for record purposes.

What is the difference between Blockchain and Cryptocurrency? (In simple form)

If you have a bank account you don’t need to carry every cent you own in your pocket. Instead, you can carry your passbook or a bank card to do payments. Whenever you make a payment your bank will update your account balance in your passbook. So, your passbook acts as a ledger. The ledger sum value represents how much money is left in your account. Each ledger note represents a transaction that you have authorized.

Blockchain is also something like your bank passbook. Blacks in a blockchain represent information about transactions. Like you save money in USD in your bank account in the blockchain you can store cryptocurrencies.

History of cryptocurrency

Bitcoin is the first decentralized cryptocurrency. It was invented in 2009. The inventor is still unknown. But, the inventor released the bitcoin using the name Satoshi Nakamoto.

But, we need to know why cryptocurrency is important. Any currency acts as an intermediate medium in exchange. Before money was invented people used it to exchange goods in markets.

Why do we need currency?

As an example, if you are a wheat farmer you can exchange your wheat with a dairy farmer to get some milk. But, such exchanges come with a lot of complications when it comes to the wholesales market. Let’s think you need to buy oil. But, the oil seller needs rice instead of wheat. But, you only have wheat in stock. Now, how can you exchange your wheat for oil?

To solve such problems just before 2000 BCE Babylon civilization invented currency. At first, rare metals were represented. Now, instead of carrying gas or wheat to buy oil you can sell your wheat in your locality in exchange for metal. Now with this metal, you can buy oil from another seller.

But, we did not consume the metal which we used between the exchanges. So, metal or money acts as an intermediate media for exchange purposes.

Why do we need standardized currency?

If you go to a gold mine you can purchase gold for a lesser price than what it is in your local market. So, even the value of precious metals varies depending on your location. So, it may not be the best exchange media for fair trade. Also, during the early stages of civilization chemists known as alchemists tried to make gold out of other materials. They also mixed gold with other metals to increase the weight. At that time there was no procedure to identify the purity of gold. So, how can gold be the perfect candidate for money?

To solve this problem early governments invented standardized money. Unlike precious metals, the money itself may not have a real value. But, the government itself guarantees the value of money.

Why do we need cryptocurrency and blockchain?

Since the invention of the internet almost every business, service, and product are digitizing. Using standard currencies on the internet comes with many problems. First, the currency exchange is a slow and expensive process. It is also inefficient. The next problem is such currencies are centralized and the governments have full authority over the control.

To solve such problems a new cheaper and faster method was invented. This new currency, also known as cryptocurrency, is a decentralized digital currency.

To maintain the existence of cryptocurrencies, blockchain is important. Blockchain is like a bank that stores all the transactions that take place in a specific currency.

What is a blockchain?

A blockchain is a decentralized ledger system that is available across a network. The chain is digitally distributed in the network. Every end device has a digital copy of the entire network which is freely available to view. So, unlike a normal ledger system, blockchains offer high transparency across the network.

Blockchain is not just for cryptocurrencies. Think of a cloud saved file. When you share a file on a cloud-like google drive, everyone who has access can view the changes in the meantime. This is because every device has access to a copy of the file which you have uploaded to the cloud. Each person can make changes to the copy. In simple words, blockchain is also similar to this.

Blockchain vs cryptocurrency an overview

Blockchains act as storage

A blockchain is a public ledger. So, its basic purpose is to store data inside the blocks. These blocks record information about transactions. Cryptocurrencies are the type of exchange media. They are similar to money which we use in the day to day market. They have a similar role as USD or Euro notes.

Cryptocurrencies have a monetary value

Cryptocurrencies have a market value. The value may differ from time to time. The price of a cryptocurrency is determined by many factors. As an example, the bitcoin price in USDT/BTC market fluctuates between 25,000 to 65,000 USDT. Supply and demand determine the price. But, the blockchain does not have such monetary value.

Blockchain has various uses

Cryptocurrency is just a currency. Its sole purpose is to be used as an exchange media. But, blockchains have various uses. Blockchain is used to store transactions and information in

  • Banking sector
  • Supply chain management systems
  • Health care sector
  • Cryptocurrency
  • NFT digital ownership programs

Mobility of technology

Blockchain is a decentralized technology. A copy of the chain is available with all the connected devices. The digital chain is distributed across the network. Cryptocurrencies are stored in the blocks of the blockchain. The owners can access their currencies via a wallet. Wallets are used to store currencies. You can access your NFTs or cryptocurrencies from anywhere in the world.

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