Edited by: Omotosho Ayotomiwa
Blockchain technology and cryptocurrency are two very diverse technologies that are inextricably linked to each other. Despite numerous reservations and mistrust, they have become significant components of our economic systems for the foreseeable future. Even though there have been many improvements and changes in recent years, there still needs to be more clarity because the terms are similar. This article discusses blockchain technology and cryptocurrency as distinct units and joint entities.
What Is Blockchain Technology?
Blockchain is a collection of digital data, or “blocks,” stored across a computer network to create a database. It functions as a digitalised, decentralised, public ledger. How the data is organised in a blockchain differs significantly from how it is typically organised. With blockchain, information is stored in blocks filled up when verifiable transactions are completed and added to the chain. A blockchain serves as the basis for immutable ledgers or records of transactions that cannot be changed, removed, or destroyed. For this reason, blockchains are often referred to as distributed ledger technologies (DLT).
What Can Blockchain Technology Be Used For?
Blockchain is used for various reasons, some of which are:
- Peer-to-peer transactions are made possible by blockchain, removing the need for a middleman like a bank or a centralised authority. Transactions might involve paying bills, concluding business deals, casting ballots, etc.
- People in nations with weak financial systems or currencies can also be provided with a more stable currency. The money has a broader range of applications and a more significant network of contacts with whom they may conduct business locally and internationally.
- Blockchain makes verifying and tracking multi-step transactions that call for verification and traceability easier. It can ensure secure transactions, cut compliance costs, and quicken data transfer processing.
What Is the Process of Blockchain Technology?
As its name suggests, a blockchain arranges its data into pieces (blocks) strung together, whereas a database typically organises its data into tables. When used decentralised, this data structure creates an irreversible chronology of data by design. When a block is completed, it is irrevocably sealed and added to the timeline. When a block is added to the chain, it receives a precise timestamp.
A blockchain enables the distribution of the data stored in that database across multiple network nodes in different places. This adds redundancy and preserves the data’s accuracy; for example, if someone tries to change a record at one database instance, the other nodes won’t be changed, preventing a bad actor from doing so. All other nodes would cross-reference one another and be able to quickly identify the individual who tampered with Bitcoin’s transaction history. This approach aids in creating a clear and precise sequence of events. This prevents any one node in the network from changing the data it contains.
What Makes Blockchain Technology So Revolutionary?
Blockchain is a cutting-edge technology that is revolutionising how we conduct business. It was initially created to eliminate the need for a middleman in transactions. Still, it is now used for several things, such as identity management, supply chain management, and data storage. Contract management and product audits can also benefit from blockchain technology.
What is Cryptocurrency?
Crypto, a digital or virtual currency, uses encryption for security and is not controlled by any entity, making it challenging for governments to manipulate. A cryptocurrency is a medium of exchange similar to the US dollar, except it is digital and uses cryptographic techniques and its protocol to govern the creation of currency units and authenticate the movement of funds. Coins or tokens are the names of cryptocurrency unit types.
Examples include Tether, Litecoin, Bitcoin, Ether, Monero, Ethereum, Ripple, Dash, Binance coin, Dogecoin and Stellar.
Advantages of Cryptocurrency
Cryptocurrency is making a huge impact in this age. Some of these benefits are:
- In contrast to, for instance, the price for transferring money from a digital wallet to a bank account, the transaction cost for cryptocurrencies is minimal to nonexistent.
- There are no time restrictions on transactions, and both purchases and withdrawals are unlimited.
- Unlike opening a bank account, anyone can use cryptocurrencies, which necessitates papers and other documentation.
How Do Blockchain Technology and Cryptocurrency Relate?
Cryptocurrency is one thing that is made possible by blockchain technology. As a decentralised digital system, blockchain is a core component of cryptocurrency instead of an optional technology. Blockchains serve as the open ledger for each cryptocurrency connected to one.
In the end, cryptocurrencies have fueled the growth and development of blockchain since it depends on blockchain networks to function. Blockchain applications go beyond cryptocurrencies, however. The technology’s range of solutions extends beyond the financial industry and will continue to upend various businesses in the future.
The two of them share the following similarities:
- Blockchain is the basis for cryptocurrencies. This means that if there had been no blockchain, cryptocurrency would not have existed.
- Blockchains and cryptocurrencies both fall under the category of intangibles. There is no server or computer where all of the data is accessible.
- Blockchains are distributed ledgers. Thus, ownership cannot exist on them. The same is true of cryptocurrencies.
What Are the Suggestions for Safe Cryptocurrency Investment?
Cryptocurrencies are only appropriate for some investors due to their price volatility. As a result, investing in cryptocurrencies is highly risky. Below are actions that will guard safe investment:
- It is crucial to research and understand the market, knowing the pros, drawbacks, and risks of investing in cryptocurrencies.
- To purchase and sell cryptocurrencies, investors should only do so through renowned exchanges. The built-in security features of reputable exchange platforms shield investors from theft and fraud.
- After buying cryptocurrency, it is essential to securely store it by purchasing a safe wallet.
- Investment diversification can assist in reducing related risks.
What Are Other Applications of Blockchain Technology?
Asides from cryptocurrency, blockchain technology can be applied in the NFT markets, operating systems in real-time, tracking music royalties, voting procedures, supply chain and logistics.
Conclusion
Both have gained popularity, making it possible to share and record digital information without editing. Both technologies will continue to develop in other sectors like commerce, banking, law, medical, and real estate.
Therefore, you are responsible for educating yourself on these developing technologies to prepare you for the future when they grow and expand fully. Additionally, it would be best to discover how both function, why it’s significant, and how you may use this study area to advance your profession.
