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Link between cryptocurrency and blockchain

A new investor frequently uses two terms that are spoken simultaneously when they first enter the realm of investment.

"Cryptocurrencies" and "blockchain" are these two concepts. Since the two names are combined so frequently, many investors believe they both refer to the same item. This is especially relevant if the investors lack technological sophistication. We'll take a closer look at the phrases blockchain and cryptocurrency in this article to better grasp what they imply and how they connect to one another.

What do you understand by a Blockchain?

A blockchain is a group of documents or an online database that resembles a spreadsheet. In contrast to a standard spreadsheet, a blockchain may contain far larger amounts of data, such as records of cryptocurrency transactions, organised into "blocks" or groups.

A "distributed ledger" or several computers are used to distribute these blocks. Each block is "chained" to a previously filled block after it exceeds its storage limit, at which point a new block is put to use.

How does this blockchain function?

Data is kept in blocks that are connected by chains in blockchains. An entirely new block is created each time a new collection of data is received. As soon as one block is full, it is connected to the one before it. As a result, the facts are chronologically chained together. Each node in the network includes information from multiple transactions.

Since it is decentralised, no single individual or organisation owns the blockchain. It is safer and more reliable because of this functionality.

What is Cryptocurrency?

Digital currency known as cryptocurrency has a market value similar to other currencies. Similar to gold, cryptocurrencies can also be employed as a store of value.

The first cryptocurrency and fore- runner of blockchain technology was Bitcoin.

Later, several cryptocurrencies developed their own blockchains, including Ether (known as Ethereum).

Similarities between Blockchain and cryptocurrency

Platforms that need a coin but are decentralised can be made possible via blockchain. The technology that acts as the distributed ledger and permits a network to maintain consensus is called blockchain. The network can track transactions and transfer information and value thanks to distributed consensus.

The tokens used in these networks to convey money, cover the cost of transactions, or offer network incentives are called cryptocurrencies. Additionally, you can think of them as a tool on the blockchain, sometimes acting as a resource or service or even as a way to digitise asset ownership.

INTANGIBLE

Cryptocurrencies and blockchain both have an ethereal nature. Like the US dollar or the Indian rupee, cryptocurrencies are ethereal digital assets that you cannot physically hold. Cryptocurrency storage blockchains do not consist of a single location or single physical data centre.

INNOVATION

Blockchain & cryptocurrencies are both examples of technological progress. The technology that underlies cryptocurrency is called blockchain. Traditional databases are far less sophisticated and secure than blockchain. Compared to traditional currencies like gold or silver, cryptocurrencies are more technologically advanced.

INTERDEPENDENCE

The first cryptocurrency in the world, bitcoin, needed a way to record transactions, therefore blockchain was created. Blockchains are used by all of the major cryptocurrencies to store transaction data. A bitcoin blockchain keeps track of new bitcoin purchases.

Blockchain, put simply, is a database of all cryptocurrency transactions made at any time, everywhere in the globe. It's a system for storing data that makes it difficult to alter, hack, or manipulate the system.

Blockchain is a public ledger that disseminates data about all cryptocurrency transactions throughout a network of all linked computers, allowing anybody to examine the information, including cryptocurrency mining and trading. It lacks a single authority or centralised management.

Blockchains are more intricate than conventional databases built and updated by a central authority, but they are more secure because no person or organisation may access the data without the right cryptographic private key or without the owner's consent.

Difference between Blockchain and cryptocurrency

FUNDAMENTAL NATURE

Data storage using blockchain is a technique used in decentralised networks. Like the US dollar, cryptocurrency serves as a medium of exchange. Beyond cryptocurrency transaction records, a blockchain can be used to store various other sorts of data.

FINANCIAL VALUE

Each and every cryptocurrency has a monetary worth. You've probably heard about Bitcoin reaching a high of $65,000 (equivalent to 48 lakh rupees) or Ether reaching a high of $4,000. (about 3 lac rupees). A blockchain is not worth anything financially.

USAGE

Beyond cryptocurrencies, blockchain technology has other applications. Blockchain can be used to track transactions in the healthcare, retail, supply chain, and financial industries. Cryptocurrency is a form of virtual cash that may be invested in as well as utilised to purchase products and services.

MOBILITY

The use of blockchain technology is global and decentralised. All of a blockchain's records are not kept in a single place. Despite being stored in blockchains, cryptocurrency can be accessed through mobile wallets. If you have a bitcoin wallet, you could use it wherever merchants who accept bitcoins are located.

TRANSPARENCY

Being a record of transactions, blockchain offers a great level of transparency. Anyone can sign up for a blockchain system and access the data there. Cryptocurrencies, but on the other hand, provide anonymity. Because of this, no one can tell who is behind a bitcoin transaction, even though anyone can see its source and destination.

Cryptocurrency’s foundation is the blockchain

Both of these phrases gained popularity at the same time, it is usual for investors to believe that blockchain & cryptocurrency seem to be the same thing.

The truth is that cryptocurrency has only increased interest in blockchain. Blockchain technology has been around for quite some time. It was not, however, frequently employed.

Cryptocurrencies' basic existence is built upon the blockchain. Cryptocurrencies wouldn't exist if the blockchain stopped working. Blockchain technology might still be used in other industries even if cryptocurrency goes extinct.

Cryptocurrency’s foundation is the blockchain

How does Blockchain Function?

Blockchain is a method for decentralised digital data management. "Digitally" and "decentralised" are the important words. The following describes how a blockchain functions:

Block and chain are the roots of the word blockchain. This indicates that the system divides data into separate pieces and saves them as a chain.

The chain lengthens as more transactions are completed. The more links there are in the chain, the more challenging it is to falsify the data. This is due to the fact that each time data is altered, a new hash is created. The new hash will be distinct from the previous one. As a result, the link will be severed, allowing the system to recognise the modified data. As a result, a blockchain-based system is more secure than an established one.

Blockchain-related data is not kept in a single location. It is rather kept on a peer-to-peer network. In other words, before a new piece of data is added, the data is automatically vetted and shared among all participants. Hackers may seize power on computers or a whole network can be taken over by hackers. To take control of every machine in a decentralised peer-to-peer network, however, is nearly impossible. Again, this increases the safety of the network.

What Makes Blockchain the Basis for Cryptocurrencies?

The fundamental principle guiding the development of cryptocurrencies is that control over money should be decentralised. Power needs to be shared among the people rather than being centralised in the control of central banks. Only the usage of blockchain technology makes this possible.

A distributed system that is simultaneously available to all participants is made feasible by blockchain. Cryptocurrencies would be digital money issued by a different organisation without the usage of a blockchain. The money would still be vulnerable to manipulation because the authority to control it would still be centralised.

What Makes Blockchain the Basis for Cryptocurrencies?

Because of blockchain technology, every stakeholder can simultaneously access a comprehensive record of data thanks to blockchain technology. As a result, the system is totally transparent. The most important component is transparency since it fosters trust, and trust increases the acceptance of any money among the general public.

Records are dependable thanks to blockchain technology's security characteristics. Without blockchain technology, anyone could easily hack the network, wiping out all the money value.

Blockchain is today's version of the safety deposit box that banks offered in the 19th century. One of the main factors contributing to the stability of the cryptocurrency system is the fact that it is virtually impossible to hack.

Almost anyone in the world may simply access blockchain technology. Blockchain technology is accessible to anyone with a basic internet connection. Even the use of elevated internet is not necessary.

This implies that blockchain can be used to send money around the world without being subject to the restrictions and fees associated with traditional financial transfers. Like email, blockchain technology functions similarly. Therefore, anyone with access to email can send funds using blockchain technology. Additionally, blockchain guarantees that transactions happen quickly.

The network has been designed with a time latency to increase security. Besides, cryptocurrency transfers are seen as being almost instantaneous.

In conclusion, blockchain and cryptocurrency are two distinct, although linked, ideas. The blockchain idea has by far found its greatest application in cryptocurrencies. By no means, though, is it the only application. On the other hand, blockchain has suddenly become well-known after spending many years in digital obscurity due to the popularity of cryptocurrencies.

How blockchain technology and cryptocurrencies interact?

Blockchain is a core component of Bitcoin as opposed to being an optional technology. In the end, since cryptocurrencies depend on their network to function, cryptocurrencies have fueled the development and growth of blockchain. Blockchain applications go beyond cryptocurrencies, though. The technology's range of solutions extends beyond the financial industry and will continue to upend a variety of businesses in the coming years.

The fact that the first blockchain served as the database for all transactions involving bitcoin (the first cryptocurrency) may be the reason why the names have come to be used interchangeably. In 2009, when blockchain was initially used, it wasn't recognised as such.

How blockchain technology and cryptocurrencies interact?

It got its name from the way transactions were organised into data blocks and connected together using a mathematical formula that generates a hash code. 6 Although the idea of a cryptographically secured chain of data blocks had been conceived in 1982 and perfected in the early 1990s, it was this ground-breaking original coin that made the system well-known.

The University of Cape Town (UCT) provides the online short course Blockchain and Digital Currency: The Fate of Money for people who want to focus further on cryptocurrencies. This six-week digital short course will deepen your understanding of blockchain and cryptocurrencies and show you how cryptocurrencies are poised to change the financial sector in the future.

Future of blockchain and cryptocurrency

Despite the amazing breakthroughs that blockchain brings across industries, it is still an ongoing process. There are still difficulties of scaling to balance costs and boost usability, the drive towards environmental blockchain and cryptocurrency advancements, and the limitations of generating decentralised, uncollateralized crypto fund lending.

Blockchain technology and cryptocurrencies are causing upheavals outside of the financial services industry as conventional institutions and start-ups alike increasingly seize the opportunity it presents. The rate of technological advancement doesn't appear to be slowing down.

While some people are still unsure about the future of cryptocurrencies, many people view 2021 as a turning point for their investment strategy.

It has yet to be determined whether or not it will be a wise investment in the long run. Some believe that Bitcoin's fixed supply will cause it to gain in value over time, while others believe that the vast ecosystem of decentralised apps being built on the Ethereum blockchain network will raise Ethereum's worth over the years.

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