
The terms cryptocurrency and blockchain are often used interchangeably. However, they relate to two very distinct concepts in the realm of digital finance.
Their unique roles and their relative applications can only be understood when knowing what makes them different from each other. Here is a detailed outline of how they differ from their peculiar characteristics to the relationships between them.
Cryptocurrency refers to a type of digital or virtual currency that utilizes cryptography for security purposes. It works on a decentralized platform. On the contrary, blockchain is a distributed ledger application that stores transactions on a network of computers safely and transparently.
Acryptocurrency isn't reliant on any centralized authority, be it a government or a financial institution. The most well-known are Bitcoin, Ethereum, and Litecoin. In essence, a cryptocurrency is to effect secure and anonymous transfers between users. Blockchain, on the other hand, is the underlying technology that allows for the usability of cryptocurrencies.
Each transaction is stored in the 'block' interlinked with previous blocks, thus the expression "blockchain." Other key features of blockchain technology include decentralization, transparency, immutability, and security.
Even though blockchain technology is the backbone of cryptocurrencies, its uses go far beyond the simple fact that it supports cryptocurrencies. Examples include:
Despite their differences, both cryptocurrencies and blockchain possess several similar characteristics:
Though closely related concepts within the ambit of digital finance, cryptocurrency and blockchain exist for two different purposes and have different natures. Cryptocurrency is essentially a digital currency meant for making transactions, while blockchain forms the fundamental or base technological concept that supports some applications by safely recording data.