The Differences and Similarities of Blockchains and Cryptocurrencies
Are blockchains and cryptocurrencies the same thing, or do they represent different concepts? Even though blockchain technology is directly connected to cryptocurrencies, there are still major differences between these terms. Let us try to break this down and explain how these two ideas are different, but still closely linked to each other.
Blockchain is a novel technology based on a distributed ledger that is interconnected and forms a chain of new blocks. Each block contains new digital data that is collected, verified, and ultimately stored on the distributed ledger technology, aka the blockchain. Once recorded, this data cannot be modified. The data in a block generates a hash value. The hash changes every time the data changes. Newly created blocks contain the hashes of all the previous blocks. Based on these hash values, it is possible to verify whether or not a part of the chain has been changed.
A cryptocurrency is a use case of blockchain technology. It is a digital, or virtual currency based on cryptography, that needs a blockchain to be transferred. Cryptos are usually decentralized assets, which means that they are not issued, or under the control of one single subject, government, or institution. Cryptocurrencies are the coins and tokens used on the blockchains and also can be a monetary tool used for buying, selling, or exchanging.
Blockchain VS Cryptocurrency
Let us explain with more detail about blockchain and cryptocurrency. In most case, cryptocurrency is given as a reward to the blockchain users for their certain activities in the blockchain ecosystem. This reward system is possible because the cryptocurrency has its value in the blockchain network and it drives the whole ecosystem to operate smoothly. However, outside of the chain, the cryptocurrency does not fully present its monetary value; it is hard to buy what you need and also, you cannot pay for many of actual services with it.
As we explained so far, blockchain and cryptocurrency are different concepts. However, some people are confused about the concepts and misunderstands that they are the same. That is probably Bitcoin, the world’s first and most popular cryptocurrency, uses the same name with the network that powers it. However, since Bitcoin was the first real use case of Blockchain technology, some people regard those two are the same. Moreover, some of the people has immediately associated blockchain and cryptocurrencies to Bitcoin, and may mislead that other blockchains are all part of Bitcoin or other blockchains are also cryptocurrencies.
But the blockchain and its native cryptocurrency don’t have to use the same name. Ethereum is a blockchain network, and Ether is its proprietary token. Ripple is a network, and XRP is a coin used in the Ripple ecosystem.
There are examples of blockchains that don’t use a cryptocurrency at all. IBM Watson is a supply chain management system based on blockchain technology that does not use a crypto asset. IBM is relying on the immutable and distributed nature of ledger technology to streamline their business processes, and to improve its services.
A blockchain is indispensable to a coin or token, but as IBM proves, a cryptocurrency is not a prerequisite for a successful blockchain use case. Besides financial services, blockchain technology can be applied to diverse fields including healthcare sector, voting, supply chain, and real estate, and there can be some cases that do not need cryptocurrency as IBM’s case is.
Bitcoin is the 1st generation of blockchain technology. Ethereum belongs to the 2nd. Currently, new and robust and modern blockchain projects that belong to 3rd generation, are being developed. FLETA, one the blockchain projects of 3rh generation, is developed for decentralized applications (DApps). We feature a fair mining process and a new consensus algorithm known as Proof-of-Formulation. Forks and DDOS attacks are not a feasible threat to FLETA due to our unique system setup, and high speed of 14,000 TPS and unlimited scalability make us one of the best blockchain platfroms for DApps to be utilized.
Blockchain and cryptocurrency is closely related, but they are not the same. The former is the fundamental technology, and the latter is just one part of the blockchain system. A cryptocurrency cannot exist without a blockchain, and the blockchain needs a cryptocurrency to exchange and transfer values. The two technologies depend on one another, and for a project to prosper and flourish, both of these structures should be in unity.
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