If you have heard about cryptocurrencies, then you may have heard the word blockchain as well. While they are related, they are not the same thing. Understanding the differences between these two technological phenomena will help you make an educated decision regarding which one to invest in and which one to create your own cryptocurrency based on.

Blockchain and cryptocurrency are two terms that often appear together in business headlines today. Both are growing in popularity and have the potential to change the way we think about exchanging money and conducting transactions online. 

In fact, many people believe that blockchain technology will soon become an integral part of many business processes, including record keeping, supply chain management, market trading, and more. So what exactly are these two buzzwords and how do they fit together? 

This article will explain some of the basics of both blockchain and cryptocurrencies as well as their relationship to each other.

What is Blockchain?

The blockchain is the backbone of all cryptocurrencies, which is what makes it so valuable. In short, the blockchain is a public ledger that records transactions in chronological order. 

Blockchain ledgers are decentralized, meaning there's no one centralized data hub where all transactions are stored. Instead, copies of the information are spread across multiple personal computers on a peer-to-peer network. The blockchain is secured with cryptography. 

All transaction details (including sender address, recipient address, and amount transferred) are visible to anyone who has access to the blockchain. All this information is encrypted using algorithms like SHA-256 or RIPEMD-160. 

The most popular form of cryptocurrency right now is Bitcoin. Bitcoin was first introduced by an unknown person or group under the name Satoshi Nakamoto in 2008 as an open source software application for transferring money without going through a third party financial institution such as PayPal or Western Union.

What is Cryptocurrency?

A cryptocurrency is an encrypted digital currency that can be sent from one user or device to another user or device on a peer-to-peer network. There are many types of cryptocurrencies, but the most popular ones today are Bitcoin, Ethereum, Litecoin, Monero, Ripple, and Dash. 

Cryptocurrency transactions are recorded in a public ledger called a blockchain. In this way, anyone with access to the internet can see which wallets or accounts are sending coins (and how much) to other wallets or accounts. 

The blockchain is a shared database that stores information about every transaction made within its ecosystem – including the amount of each transaction, where it originated from, who sent it and who received it.

How Do They Work Together?

Cryptocurrency is a digital currency that allows its users to make peer-to-peer transactions without the need for a middleman such as a bank. The most common type of cryptocurrency is Bitcoin, which was invented by an unknown person in 2009. 

It's generated by computers that use complex mathematical formulas to solve problems, or blocks on the blockchain. They're rewarded with bitcoins for their work, creating new bitcoins in the process. Blockchain technology makes it possible to securely store these records of ownership and transferring them from one party to another. 

It provides a way for people who don't know each other, or live in different countries, to trust one another because everyone has access to the same information. Blockchain eliminates the need for trusted third parties like banks, governments and credit card companies because every transaction is recorded publicly on thousands of devices all over the world. 

Once someone transfers money through bitcoin (or any other cryptocurrency), it becomes locked inside a block that can only be unlocked by solving math equations created specifically to verify the authenticity of this transaction. 

All of this prevents hackers from being able to change data once they've encrypted it in the public ledger.

What Are the Benefits of Using Both?

The benefits of using both blockchain and cryptocurrencies is that you can use cryptocurrency for most transactions, but when it comes time for a transaction that requires verification, the blockchain is there to authenticate the transaction. 

It's a good way to have security without spending too much money. For example, if someone wants to purchase something online with their credit card, they'll need to give their credit card information over the internet. That makes them vulnerable because there are a lot of different entities that will be able to see their information or steal it. 

On the other hand, if someone wanted to make an online payment for a good using cryptocurrency, then their private key would unlock their coins from their account. When the seller confirms that they've received the payment in coins, then those coins will go back into the buyer's account. 

Blockchain can help solve this problem by storing a public ledger of all transactions which means people don't have to worry about losing funds due to fraud. One of the ways blockchain has been used is to verify these transactions using smart contracts. A smart contract ensures that two parties agree on terms before making any transaction happen. 

Once agreed upon, no one can interfere with these terms or change anything without consent from all parties involved so each party knows what's going on. Another benefit of blockchain technology is its ability to decentralize data. 

In many centralized systems, governments and large corporations control how data is stored and distributed meaning less power for the individual who owns the data.

Are There Any Drawbacks to Using Blockchain and Cryptocurrency?

There are some drawbacks to using blockchain and cryptocurrency. For example, blockchain is still a relatively new technology and it could take time to understand how it works. 

There's also the potential for governments to regulate cryptocurrency, which could affect their value. Lastly, the price of cryptocurrencies is volatile, so they may not be appropriate for everyone. 

Summary

A blockchain is a digital ledger that records transactions. It is distributed across multiple computers, or nodes, in a peer-to-peer network. This means that there isn't one central authority that controls the data. 

Since data on the blockchain cannot be altered retroactively without the alteration of all subsequent blocks (which is almost impossible), it's very difficult to hack into a blockchain. 

Cryptocurrencies are virtual currencies created on top of blockchains. The two best-known examples of cryptocurrencies are Bitcoin and Ethereum.