Blockchain vs. Cryptocurrency

What’s A Blockchain?

Blockchains are distributed ledgers secured by cryptography. They are essentially public databases which everyone can add to and read. Instead of the data residing on a single centralized server, the data is copied across thousands and thousands of computers worldwide. The consecutive string of every block ever executed makes up a blockchain: a distributed database of chronologically ordered transactions. More on blockchains here.

What’s A Cryptocurrency?

A cryptocurrency is a digital store of monetary value with the primary use of which is for buying and selling goods, services, or property. Popular examples include bitcoin, litecoin, and Dash. Cryptocurrencies are cryptographically secured against counterfeit and often are not issued or controlled by any centralized authority. Cryptocurrencies can be referred to as tokens or coins. More on cryptocurrencies here.

What’s The Difference?

Blockchains enable decentralized platforms which sometimes require a cryptocurrency. The blockchain is the technology that serves as the distributed ledger and allows a network to maintain consensus. Distributed consensus enables the network to track transactions, and enables the transfer of value and information.

Cryptocurrencies are the tokens used within these networks to send value and pay for these transactions, or to provide network incentives. Furthermore, you can see them as tool on the blockchain, in some cases serving as a resource or utility, or to digitize the ownership of an asset.

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NEXT: What is Decentralization?

What is Decentralization?

Decentralized networks are made up of computers, also known as nodes, that interact on a direct, peer-to-peer basis without the need for third parties. Within a decentralized network, information is distributed to every single “node” on the network. Each node has an updated copy of the recorded data. Decentralized networks can also distribute data in such a way that information can be validated without that information being transferred to a third party by reaching an agreement among nodes. Data is validated by using an agreed-upon consensus mechanism, which often involves the other computers on the network checking the validity of the data before it becomes permanently imprinted onto a blockchain.

In a decentralized network, each participating node is independent of the others. Rather than following the instructions of a central authority, decentralized nodes connect using common rules, but maintain their sovereignty and manage their own privacy. This helps keep the network secure, while also ensuring relatively democratic governance.

Centralized
Decentralized

A consensus mechanism is a way for nodes to come to an agreement about the integrity of data before it becomes part of a blockchain. Once the block contains this data, it is distributed amongst nodes, making it near impossible to change data that has already been recorded to the ledger. Instead of changing data in one centralized database, to change the data on a decentralized network (blockchain), a majority of nodes would have to be updated to reflect fraudulent information within a short amount of time. Otherwise, such information will be rejected by validating nodes.

More Information

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What is Cryptocurrency?

Background

Cryptocurrencies such as bitcoin or ether are scarce digital assets which exist on a decentralized network of computers. The currencies, which are referred to as coins or tokens, can be used within their network as a digital store of value or a medium of exchange.

Digital Ownership

In the same way that ownership of a house or a car is controlled by whoever holds the deed, a cryptographic asset is owned by whoever holds the private cryptographic key that is registered with the network. The difference with cryptographic assets is that instead of a central registry, a network of many peers keeps track of who owns each asset.

Transferring Digital Assets

When a cryptocurrency transaction occurs, the sender broadcasts a message to the network indicating that they are transferring assets under their control to another user on the network. They specify the receiver’s public address within the network, and the owner can only access assets transferred to that address if they have the corresponding cryptographic key.

Fun Fact: The first ever purchase of physical goods using cryptocurrency was on May 22, 2010, when Laszlo Hanyecz purchased two Papa John’s pizzas on the Bitcoin network for 10,000 BTC. These may also have been the most expensive pizzas ever purchased. The total value of those 10,000 bitcoin is now over $65M USD.

Network Security & Blockchain
A blockchain is a digital file which new information can be added to over time. Data is added to this file in blocks, which are linked together with an encryption function to form a chain. Most blockchains are shared between a wide network of peers, which means that once the data is confirmed by a majority of the network, it cannot be edited.

The original concept of the blockchain was first proposed in the Bitcoin whitepaper. The Bitcoin blockchain is used to keep a record of all transactions which have ever occurred in that network, and thereby acts as a communal registry of ownership of all the Bitcoins that have ever been created. When a participant in the network wishes to make a transaction, they must wait for all of the nodes in the network to update their copy of the record before they can spend their assets. Our free Blockchain Security course covers these issues and more.

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For full course material and information about in-person seminars and training events please visit our education portal.

NEXT: What is Blockchain?

What is Blockchain?

A blockchain is a decentralized ledger that records all transactions. Each transaction that is conducted leaves a permanent record that can be referenced at any time. The structure of the blockchain allows these transactions to be self executing and immutable. Once validated, data is permanently recorded to the blockchain and cannot be altered in any way.

The name blockchain largely refers to the structure of the technology. Blocks contain data that represents transactions, and when a block is created or “mined”, all the data contained in the block is added to the chain. Permanently. All ledgers are updated to include this new data. When all of the computers on the network have the same data in their copy of the ledger, this is called reaching consensus. Blocks are then linked together to form a chain and can be referenced at any time, hence the name blockchain.

Because a blockchain is designed as a distributed ledger, many computers directly connect to form a peer-to-peer network. If someone wants to hack the network, they would have to maintain control the majority of the network for a certain duration of time. The chances of a successful hack are extremely low, which illustrates the security surrounding blockchain technology.  Blockchain tech can be used to manage to grant others access to your personal data. This has the potential to be a very important tool in regaining control of your digital identity.

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For more in-depth information about blockchain and cryptocurrencies, please be sure to visit out downloads and links pages, and be sure to subscribe to our mailing list below.

For full course material and information about in-person seminars and training events please visit our education portal. Our free Blockchain 101 course covers all of this and more in great detail.

NEXT: Blockchain vs. Cryptocurrency