Cryptocurrency and Blockchain – The Duo Transforming Finance

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For the last few years, terms such as ‘cryptocurrency’ and ‘blockchain’ have become popular in the sphere of finance and IT (information technology).

But what are these two, and how are they connected? Here we will explain these ideas further and establish how they are connected.

Understanding cryptocurrency

Cryptocurrency can be defined as a digital or virtual currency that has attributes of money and makes use of cryptography to secure the transactions.

Cryptocurrencies are different from the government-backed currencies – known as fiat currencies – as they are based on the technology known as blockchain.

This means they cannot be regulated by any central power such as a bank or a government.

Bitcoin is the first and the most famous kind of cryptocurrency – it was developed in 2009 by a person or a group of persons, later known as Satoshi Nakamoto.

After that, thousands of cryptocurrencies have been created. Each of them has its own characteristics and use cases.

Some of the most recognized ones are Ethereum, Ripple (XRP) and Litecoin.

The role of blockchain

Cryptocurrencies can be described as being based on blockchain technology.

It is an electronic recordkeeping system that is distributed across a network of computers and keeps a record of all the transactions that occur in the network.

This makes the network transparent and secure because every node in the network has a copy of the ledger and cannot be cheated.

A blockchain is made up of blocks – of which every block is a record of multiple transactions.

The created block is linked to other blocks, which form a chain. Once a block is added, it cannot be altered.

This partiality of blockchain makes it remarkably secure – mainly when any alteration in any of the blocks will affect all the subsequent blocks, making it almost impossible to do so, unless the person doing it controls the majority of the network.

The relationship between cryptocurrency and blockchain

It is important that you know that all cryptocurrencies work on blockchain technology.

Here’s how they are interconnected.

Decentralization

Cryptocurrencies and blockchain are similar in that they both are decentralized. This implies that no one organization or firm owns the whole network.

This is decentralization, which is one of the factors that guarantee security and confidence in the system.

Security

Cryptocurrencies entail the application of cryptography to protect…