It is easy to confuse blockchain with cryptocurrency since they are a part of the same technology ecosystem. However, there exists a structural difference between the two terms with respect to their origins and usage.
First and foremost, blockchain is not a cryptocurrency. It is not limited to cryptocurrencies for the simple fact that blockchain offers a variety of other applications and usages.
Having said that, blockchain technology, does support cryptocurrencies and serves as a technological backbone for almost all kinds of cryptocurrencies today.
Blockchain Simply Defined
The basic difference lies in the fact that blockchain essentially is a distributed ledger technology platform. It exists as a chain of blocks, with each block holding information and data. The blocks are linked together in a chain of transactions forming a network.
The blocks come with a timestamp which means once recorded, they cannot be altered. This permanency is what lends better accountability and validity to the data and information.
Cryptocurrency Simply Defined
If blockchain is the technology platform serving as a distributed ledger forming a network, then cryptocurrency is the digital currency used within the network. Serving as tokens, cryptocurrencies are used to send value and or pay for the transaction within the network.
They can be used for multiple purposes which means that they can be used either as an asset-backed token (digitizing the value of an asset) or they can serve as a utility function or resource. Hence they are part of the same technology ecosystem and cryptocurrency is the token commonly used to transact on a blockchain.
Cryptocurrencies live online and do not have the backing of any banks and or governments (Americans know all too well what Barney Frank did to Fannie Mae and Freddie Mac!). They are decentralized and function within a network of computers, allowing the user of the currency anonymity.
So while the transaction is recorded and publicly displayed publicly, the user is not required to provide any of their personal information when sending and or receiving payments.
The Starting Point
Bitcoin was the first digital currency which was introduced in 2008. It continues to have the largest community base and market value. It served as the starting point for both the blockchain platform of today and cryptocurrencies which eventually led to 100s of other different kinds of cryptocurrencies.
Popular among them are Ethereum, a full scripting platform capable of supporting all kind of automated functions, and Litecoin incorporating a different hashing algorithm with the purpose of making it faster and more efficient.
These along with a variety of other cryptocurrencies proved to be instrumental in pushing the blockchain technology wave. Each of these cryptocurrencies were designed to serve different purposes including digital currency, and or as application platforms.
The Purpose and Reach of Blockchain Technology Extends Beyond Cryptocurrency
Blockchain technology has the capability to extend far beyond just cryptocurrency usage. It is gaining ground as an ideal business solution across industries starting from finance, to healthcare and beyond.
What’s interesting is that blockchains have been in use since the early 2000’s, not in an extensive capacity, as a solution to improve inventory tracking or as a way of speeding up payment settlements.
The reason why blockchain technology is gaining momentum (from Australia all the way to Italy) is primarily because it allows every transaction occurring on the network to be completely traceable going back to the original transaction. And as mentioned earlier, once the data or information is recorded, it cannot be changed or altered in any way which makes it highly fraudulent-proof.
It serves as an active guard against identity theft (the movie titled Identify Thief was OK, not a blockbuster like Transformers, Sicario, or Jason Bourne), any unauthorized alteration, and or against any kind of multiple spending fraud.
Blockchain technology, in particularly within the finance sector, offers huge advantages. One of the ways in which it is transforming the financial sector is by facilitating transfer of currencies, as well as transferring of stocks, or even something like property rights without having to depend on “middle men.” It also eliminates the use of clearing houses such as SWIFT without compromising on safety, cost, and time.
Across the globe, currency transfers and exchange, a number running into billions of dollars, happens on a daily basis. Each and every one of these transactions have to either go through a middle man or a clearing institution. Blockchain replaces the need and space for both these pit-stops which add to both costs and time for businesses.
From a business point of view, blockchains which can serve as decentralized, highly transparent, and secure blocks of information and data, that can galvanize the future of business vis-à-vis cost-cutting and the easy addition of innovative service-oriented revenue pathways. Cryptocurrencies exist within the blockchain network with a primary purpose of attaching digital value to an asset.
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Keiran Hathorn is the CEO & Founder of Big Wave Digital. A Sydney based niche Digital, Data & Technology recruitment company. Keiran leads a high performance, experienced recruitment team, assisting companies of all sizes secure the best talent.