The relationship between blockchain and cryptocurrency

It is true that whenever we use the word blockchain, cryptocurrency automatically comes to our mind. Many people think that these two words are synonymous and are often used as synonyms. Cryptocurrency is a form of money that uses in blockchain technology.

In this detailed guide, you will learn about how blockchain technology works and how cryptocurrencies relate to it.

What Is a Blockchain?

People first became familiar with Blockchain when Bitcoin debuted. Bitcoin is a cryptocurrency of blockchain technology, hence the myth that blockchain and cryptocurrency are the same. Blockchain is a decentralized ledger that records transactions and these ledgers are immutable.

So, once a transaction is approved and included in the block, it becomes permanent. Then it always exists on the blockchain. It is completely decentralized meaning that there is no central authority that owns or operates it, which distinguishes blockchain technology from others, and it is completely controlled by consumers.

Data is stored in blocks and each block consists of a fixed number of transactions. When the block is completed the network approves it and is added to the blockchain making it immutable.

 What Is Cryptocurrency?

Cryptocurrency is basically made up of two words – crypto and currency. While currency obviously means money, crypto means encrypted or written in code. That means cryptocurrency is a digital asset that has the same value as money. It's designed to facilitate exchange, and that's where blockchain comes into the picture. All crypto transactions that take place are recorded through blockchain technology.

Bitcoin is the first cryptocurrency to be named after the blockchain. Since then, thousands of cryptocurrencies have entered the market.

Relationship Between Cryptocurrency and Blockchain Technology

Cryptocurrency and blockchain work together to create a transaction chain that is decentralized, secure and fully digital. Servers can be housed in any warehouse or operation theater, no office required. The similarities between the two are discussed below:

1. Advanced Technologies

Blockchain and cryptocurrency are both advanced technologies that are still intriguing to many. No annoying experience with no authority to supervise. Cryptocurrencies are also created by an advanced technology and had no meaning when they debuted. People couldn't believe how transactions could be made using a currency that had no physical presence. But today they have gained huge popularity.

2. Intangible

Both cryptocurrency and blockchain are out of touch. You cannot access the entire data from any such server or computer. Hence, blockchain has no single ownership as it is a distributed ledger. Cryptocurrency is not the same as fiat currency and the same applies to it. But in reality it cannot be touched or grasped.

3. Interdependent

Blockchain technology was developed to support Bitcoin. In other words, without blockchain, Bitcoin would not have been created. Both technologies are interdependent and blockchain is the foundation of cryptocurrency.

Blockchain Use Cases Other Than Cryptocurrency

Although cryptocurrencies are completely dependent on blockchain, blockchain has many extensions beyond cryptocurrencies. Blockchain technology can also be used for various innovative purposes, such as:

1. To Ease Exchange and Transfer

Blockchain can be used to manage the financial sector in the future. The financial sector aims to facilitate money transfers and transactions, but traditional banking methods are very time-consuming, whereas blockchain transactions are simple, fast and secure. Besides, it allows users to transact directly with each other and eliminates the need for middlemen like banks. Additionally, since all transactions are recorded and irreversible, it increases transparency and security.

2. Cybersecurity

Since blockchain technology is decentralized, hackers cannot target only one point of hacking. Data is segmented thus making blockchain the most secure storage. Moreover, if an unauthorized change is made, it can be easily detected.

3. Smart Contracts

In recent times blockchain technology has introduced transparent, self-executing and secure smart contracts. Smart contracts record the terms of the contract when the parties meet the terms of the contract, and are automatically executed As a result, they can be used for many purposes, and can significantly reduce business costs.

4. NFTs

NFTs, or Non-fungible Tokens, are gaining popularity due to their unique characteristics. They depict the ownership of an asset. It can transform anything from an art piece to a digital asset like a coin. They have gained a new identity since their popularity and are commonly used in the metaverse, which are also blockchain-based.

5. Record Availability

Blockchain's transparency can be used to share records across industries to facilitate faster processing. As such, patient records can be easily presented to insurance companies. Since blockchain verifies data, insurance companies can easily leverage this technology.

6. Voting

Elections are called fraudulent elections by many, despite the use of advanced technology, their authenticity is always in doubt. Blockchain technology can solve this problem. If elections are conducted through blockchain technology, there will be no scope for fraud and tampering with voting records. Immediate result declaration will be an added advantage.

Is There Any Future for Cryptocurrencies Without Blockchain Technology?

The first-ever cryptocurrency, Bitcoin, was based on blockchain technology. Many question what the future holds for cryptocurrencies without blockchain technology, even though they have popularized each other.

As all new cryptocurrencies following Bitcoin began using blockchain technology, blockchain and cryptocurrency became synonymous in the public eye. Now most cryptocurrencies are working on blockchain technology.

However, there is no guarantee that these two technologies will co-exist in the future. IOTA is a cryptocurrency that is not blockchain-based. This crypto is built on a mathematical concept called the "tangle" and has already caused a stir. Because its owners claim that it will grow faster than Bitcoin and surpass it.

This is just the beginning of another new era where blockchain and cryptocurrencies will transform unimaginably and impact the future in unexpected ways.

 Final Words

The near future guarantees that blockchain technology and cryptocurrencies will witness more acceptance. However, these two distinct technologies run parallel to each other. This guide covers just what you need to know about the relationship and differences between the two.