Blockchain 101

The Differences Between Blockchains and Cryptocurrency

What is the difference between Blockchain and Cryptocurrency?

The blockchain is the technology that serves as the distributed ledger that forms the network. This network creates a means for transacting and enables the transfer of value and information. A blockchain is a platform which allows cryptocurrencies to exist. Cryptocurrencies are coins or tokens used within these networks to send value and pay for these transactions. Furthermore, you can see them as a tool on the blockchain, in some cases serving as a resource or utility function. Other times they are used to digitize the value of an asset.

Blockchains serve as the base technology, in which cryptocurrencies are a part of the ecosystem. They go hand in hand, and crypto is often necessary to transact on a blockchain. But without the blockchain, we would not have a way for these transactions to be recorded and transferred in a transparent way. A blockchain is a technical design pattern which allows networks to exist without relying on a central authority for network management and maintenance. A cryptocurrency is usually (but not always) a required part of a blockchain ecosystem, and is used to incentivize users to secure the network.

What is the difference between a coin and token?

Most people use these terms interchangeably. However, this is not exactly correct. Both are types of cryptocurrencies, but each has slightly different characteristics. Coins are usually created on their own native network. Their job is to act as a means of transferring value. They are basically digital cash. Tokens are slightly different. Like their name may suggest, tokens specifically give rights to holders, such as voting or the ability to use a platform.

Let’s use an arcade as an example. Some have games that will only operate on tokens, you cannot put change straight into the machine. You need to transfer your money to that token to play all of these fun games. A token is required for participation in the ecosystem. An example of this is Ethereum. Ethereum has its own native cryptocurrency, a coin known as Ether. The main purpose of Ethereum is to act as a blockchain foundation for other dApps or projects to develop off of. And many of these projects have created a token as a utility, and that currency is considered a token because they represent an asset or the right to use a platform.

Still confused? Just think of a coin as money, while a token represents everything else.

Many coins and tokens can be mined. Let’s go over that process in our next lesson.