What is the difference between blockchain and cryptocurrencies?

The terminology used in the cryptocurrency market can be quite a challenge, especially for people just starting their adventure with investing. It is particularly confusing to use the terms blockchain and bitcoin interchangeably, which are not the same thing, although based on a familiar concept. So what are the differences between blockchain and cryptocurrencies? We explain!

What is blockchain technology?

Blockchain is a technology that is used to store and transmit information about transactions made on the Internet. This information is arranged in the form of consecutive data blocks. Each block collects data on a specified number of transactions. When it fills up, another block of data is created – followed by others, which form the chain mentioned above of blocks. 

Using this technology, participants can confirm transactions without the need for a central clearing authority. Unlike in a traditional centralized database, where records are processed by one main administrator (such as a government or company) – the entire blockchain is transparent. The consensus of users verifies the data stored in it. 

Blockchain is used primarily, though not exclusively, for buying and selling cryptocurrencies. Any transaction can be stored in blockchain technology. They take place outside the traditional system, and therefore without the participation of public trust institutions.

Cryptocurrency – what is it?

Cryptocurrency, in turn, is a digital form of money that is used as a medium of exchange within a distributed network of users. Unlike in traditional banking systems, information about transactions performed with cryptocurrencies is, in principle, publicly available within a digital ledger, the blockchain, as mentioned earlier network. Transactions can be performed directly between participants in the blockchain network, without any intermediaries (peer-to-peer) basis.

Bitcoin – the most popular cryptocurrency using blockchain

The most popular of all cryptocurrencies is bitcoin, most commonly identified with blockchain technology. However, its history dates back to 2009, when an anonymous programmer named Satoshi Nakamoto created an independent and decentralized electronic payment system secured by cryptography. 

Bitcoin is undoubtedly the best known, though not the only cryptocurrency available today. In addition to it, there are many other cryptocurrencies on the market, such as Ethereum (ETH), Cardano (ADA), Polkadot (DOT), Solana (SOL), Tether (USDT), and Uniswap (UNI). Individual cryptocurrencies have specific functions and were created for different purposes. Most importantly, not all cryptocurrencies have their blockchain network. Some were made from scratch, while others were built on top of other blockchains.

How are cryptocurrencies related to the blockchain?

So what is the connection between bitcoin and blockchain? Blockchain is the technology that underpins bitcoin and was developed specifically for it. So in practice, bitcoin was the first example of how blockchain works – without blockchain, there would be no bitcoin or other cryptocurrencies. This is why the two terms are so often used interchangeably. 

In practice, we can think of bitcoin (and other cryptocurrencies) as a currency and blockchain technology as an accounting or transaction recording system.

Blockchain is an alternative to the central banking system that traditional currency uses, while bitcoin is an alternative to money. However, Bitcoin is not the only version of a distributed ledger blockchain system available on the market. As we mentioned, there are other cryptocurrencies with their blockchain and distributed ledger architectures. 

You already know that blockchain and bitcoin are not the same things. However, if you’ve been using both terms interchangeably, you’re not alone – many people are doing the same thing because blockchain and bitcoin are connected. Therefore, it is crucial to understand the differences between these terms when entering the world of cryptocurrencies.

Application of blockchain technology

As blockchain and bitcoin are linked, the much broader applications of the innovative technology are worth noting – cryptocurrency exchanges are just one way to use it. Besides bitcoin and other cryptocurrencies, blockchain can also formalize digital relationships through so-called smart contracts. It can also be used in auditing supply chains, healthcare, voting systems, or confirming property rights, among others – while reducing risk and costs for all parties involved.

So as you can see, although bitcoin is based on blockchain technology, blockchain has found many applications beyond bitcoin. So it is worth being aware of the enormous potential in a blockchain – which is increasingly being implemented and bringing tangible benefits.


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