Technology Behind Cryptocurrency - An Introduction
The technology behind cryptocurrency seems to be a mystery to most of us, but it's actually pretty simple. The technology is called a blockchain.
Collaborative technology, such as blockchain, promises to improve business processes between companies by drastically lowering the "cost of trust." As a result, it has the potential to provide considerably higher returns on investment dollars than most traditional internal investments.
We'll begin by focusing on blockchain and cryptocurrency and their similarities. Following that, we'll review how cryptocurrencies and blockchains differ and why they're so popular.
Technology Behind Cryptocurrency - What are They?
What is Blockchain?
We're starting with this technology because it's at the heart of many cryptocurrencies, including Bitcoin. Furthermore, the applications of blockchain technology extend far beyond digital currencies.
In its basic form, blockchain technology is a database - a collection of electronically stored information or data. However, a blockchain has many distinct features that distinguish it from a traditional database.
As the name implies, blockchain technology is a collection of data 'blocks' linked together. This chain of blocks creates a shared digital ledger (data collection) that records the chain's activity and information.
What is Cryptocurrency?
Cryptocurrency is a digital currency. However, unlike traditional fiat currency (such as dollars, pounds, and yen), it is decentralized, which means it is not regulated by a centralized authority such as a bank, government, or country.
Other distinctions exist between crypto assets and different types of money. Cryptocurrencies are completely digital and do not exist in physical form. There are no coins or bills to be found; they are all digital.
Likewise, they are not based on another asset, such as gold, and are not kept in a bank or financial institution.
What are the Similarities Between Blockchain and Cryptocurrency?
Intangible
Blockchain and cryptocurrencies are both intangible concepts. Cryptocurrencies are intangible digital tokens that, unlike the US dollar or the Indian rupee, cannot be physically held. Likewise, blockchains for cryptocurrency storage do not exist in a single location or physical data center.
Advanced
Blockchain and cryptocurrencies are both technological advances. Blockchain is the technology that underpins cryptocurrencies. Blockchain technology is far more sophisticated and secure than traditional databases. Likewise, cryptocurrencies are more technologically advanced than physical or paper money.
Interdependent
Blockchain was created to record bitcoin transactions, the world's first cryptocurrency. Blockchains are used to record transactions in all major cryptocurrencies. For example, when a new bitcoin is purchased, it is recorded in the blockchain.
What are the Differences Between them?
Nature's Inheritance
Blockchain is a data storage technology used to save information on decentralized networks. Cryptocurrency, like the US dollar, is a medium of exchange. However, a blockchain can store information other than cryptocurrency transaction records.
Monetary worth
Every cryptocurrency has a monetary value. For example, you've probably heard of Bitcoin reaching a high of 65,000 dollars (approximately 48 lac rupees) or Ether reaching 4,000 dollars (about 3 lac rupees). However, there is no monetary value to a blockchain.
Usage
Blockchain technology has applications that go beyond cryptocurrencies. For example, blockchain technology can record banking, healthcare, supply chain, and retail transactions. Cryptocurrency is digital money used to purchase goods and services and for investment.
Mobility
Blockchain technology is decentralized and distributed globally. There is no single location where all blockchain records are stored. Although cryptocurrency is stored in blockchains, it can be accessed via mobile wallets. If you have a bitcoin wallet, you can use it to transact with anyone who accepts bitcoins.
Transparency
Blockchain, as a public ledger, is highly transparent. Anyone can connect to a blockchain network and view the data. Cryptocurrencies, on the other hand, provide anonymity. As a result, while anyone can see the source/destination of a bitcoin transaction, no one can tell who is behind it.
Bitcoin is the First Cryptocurrency Built on Blockchain Technology
Finally, blockchain, first presented in 2008 as the distributed ledger underlying bitcoin transactions, has many applications. Since then, technology has developed a life of its own and has attracted interest from many sources.
The cryptocurrency was the first use of blockchain, i.e., bitcoin. The bitcoin architecture, introduced in 2008, was created on technologies and ideas from the previous three decades, making cryptocurrency the first use of blockchain. In addition, the concept of a "chain of blocks" was also introduced by Nakamoto's design.
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