Whenever one starts a conversation about cryptocurrencies, a few things pop up in the conversation – what blockchain does it work on and is it secure? Many of the market newcomers are having a lengthy debate, wondering how blockchain and cryptocurrency are related and whether one can exist without the other.
But as the world is already witnessing multiple application scenarios of blockchain technologies, the question arises: Why are blockchains essential and how are they affecting our daily lives? To delve deep into the ability or disability to coexist with or without the other, one needs to understand what blockchain and cryptocurrencies are and how they work.
What is blockchain technology?
Blockchain can be described as a unique network that acts as a distributed ledger sharing nodes of a computer network. As a distributed ledger, the blockchain stores its information in a digital format that is inherently truly decentralized.
Often referred to as the engine that drives cryptocurrencies, blockchain ensures fidelity and data security in a crypto ecosystem, creating trust without third-party involvement. What differentiates blockchain from a typical database is its ability to store data. All critical data is structured in such a way that each block contains a set of information.
Communication between blocks takes place via a peer-to-peer network system instead of a central node. This allows each node to store a separate set of information, which is then shared with other nodes, forming a chain in P2P format. This allows the blockchain network to flag anomalies in case a situation arises where not all nodes are identical.
What are cryptocurrencies?
Now that we understand the basics of blockchain, let’s dive deep into what cryptocurrencies are and where blockchain fits in here. Cryptocurrencies, in their simplest form, are digital currencies secured by cryptography. Being decentralized by nature and based on blockchain technology, cryptos differ in that they are not issued by a central authority.
Bitcoin was the first cryptocurrency developed by Satoshi Nakamoto, and to date there are over 20,000 cryptos in the market. It is important to understand that while digital currencies can be designed on a blockchain network, they can also be used on other blockchain networks and are commonly used as a means of payment in accepted countries.
How blockchains are an integral part of cryptocurrencies
In its simplest form, blockchain is the underlying technology that cryptos operate on. Whether public or private, blockchain can function without cryptos, but cryptos cannot function without blockchains unless they are not decentralized or run by a single entity.
So, cryptos like bitcoin, ethereum, etc., since they are permissionless, need a blockchain network to work on them, private cryptos like Hyperledger, Corda, etc. don’t necessarily need a blockchain network to work when creating their Distributed Ledger for Support for confidential trade transactions.
Can blockchain exist without cryptos?
Well, blockchain is widely used today not only in financial transactions but also in other sectors like logistics, manufacturing, etc. Countries around the world have started to realize the potential of blockchain and why it is important to embrace it.
The UK, for example, unveiled a detailed strategy in April to harness the power of blockchain technology to simplify the payment process for customers. Former Chancellor Rishi Sunak had announced his intention to turn the UK into a crypto hub, seen as a leading player in technology adoption.
Even the Governor of the Central Bank of India, Shaktikanta Das, stated that while the concept of cryptos is still a concern, the underlying technology can exist and grow without cryptocurrency.
Many experts believe that blockchains have more utility in the real world than in the virtual world. Financial institutions can use them for maintaining medical records, land registers, etc. Its use is expected to improve the efficiency of various departments handling it and reduce overhead.
Conclusion
While blockchain is a crucial element in the cryptocurrency world, the same is inevitably true of the others. Therefore, it not only creates enhanced traceability of transactions, but also provides a way to store information, allowing individuals and businesses to conduct their business smoothly and hassle-free.
As the world moves towards unique technologies, blockchains can play a role given the feasibility and security aspects they offer. While there are some who believe blockchain must be used with a float token as it reduces third parties and intermediaries. Using blockchains, both with and without cryptos, represents a viable option for investors to consider.
Risk Warning: Trading cryptocurrencies involves a high level of risk, including the risk of losing some or all of your investment, and may not be suitable for all investors. Cryptocurrency prices are extremely volatile and can be affected by external factors such as financial, regulatory or political events. The laws that apply to crypto products (and how a particular crypto product is regulated) are subject to change. Before deciding to trade any financial instrument or cryptocurrency, you should fully understand the risks and costs involved in trading the financial markets, carefully consider your investment objectives, level of experience and risk tolerance, and seek professional advice if necessary. Kalkine Media cannot and does not represent or warrant that the information/data available here is accurate, reliable, current, complete or suitable for your needs. Kalkine Media accepts no liability for any loss or damage arising out of your trading in or reliance on the information shared on this website.
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