Blockchain and Cryptocurrency aren’t the same thing!

When I speak to people in business looking to implement blockchain into their processes, at least one conversation goes something like this:

“So, this cryptocurrency thing…
Do we need to buy it?
How much does it cost?
Isn’t the price really volatile?”

Short answer:
- No
- Zero, because you don’t need it
- Sometimes, but you don’t need it

Longer answer:
It’s safe to say that the blockchain community hasn’t done the best job explaining its terminology. The difference between blockchain and cryptocurrency is one of the bigger explanation failures and, in my opinion, one of the largest blockers to business adoption of blockchain.

Many business leaders believe the terms “blockchain” and “cryptocurrency” are synonymous. Hopefully, by the end of this article, you’ll understand the difference between the two and help you make better decisions when working with blockchain.

Analogy Time

Let’s use a concept that I know you are familiar with, money. Specifically, let’s talk about card payments because they’re more digital than hard cash.

When you buy your food for the week, you hand over your card to the shop, they swipe the card and money is taken from your account. This is a transaction.

You’re not aware of the machinations that occur between the shop, their bank, your bank, and your account to transfer the money between you. You’re also not really that interested. The banks are providing a service to allow the free flow of money between you and the shop (and, by extension, all other parties).

Now, let’s compare this to the world of blockchain.

Cryptocurrency is exactly what it sounds like, a currency (money).

Blockchain can be compared to the records the banks keep. These records tell the banks who has what in their account. Blockchain is just a list of transactions that can be used to show the value of any account.

Where the confusion comes from

Cryptocurrency and blockchain were developed as a single solution. Cryptocurrency was proposed and developed in response to the 2008 financial crisis by Satoshi Nakamoto.

Satoshi’s concern was the centralising of power by the banks and governments, and his solution was the development of a “peer-to-peer” (P2P) cash system (cryptocurrency).

To achieve a P2P system, a distributed record of all transactions and holdings was needed (blockchain).

Blockchain in a Nutshell

Really simply, a blockchain is a list of transactions stored in a way that means no single record (or combination of records) can be altered, added, or deleted without being noticed. Blockchains can store financial transactions, but they can actually store any data you want.

For instance, imagine a machine taking radiation readings at a nuclear power station. The last thing you want is the data recorded by that machine to be faked or altered, right? With blockchain, the machine can be given a unique ID at the factory and verifiably add a record to the blockchain for each reading. This record can be analysed and proved to be accurate, ensuring that everyone involved has no way to fake records to cover up mistakes and accidents.

Cryptocurrency in a Nutshell

Cryptocurrency is one implementation of blockchain technology where the entries are financial transactions. Think of cryptocurrencies like other currencies, such as US Dollars, GB Pounds, Euro, or Chinese Yen.

Each of these currencies has a “Token” (the dollar, the pounds, the euro, or the yen) which can be traded for goods and services. Cryptocurrency tokens are no different, but their tokens come with names like “Bitcoin”, “Ethereum”, and “Ripple”

Conclusion

You should now be able to see that blockchain is the network upon which cryptocurrencies sit and that cryptocurrency is only one implementation of blockchain technology.

This means you can have a blockchain record integrated into your business processes without entering the world of cryptocurrency and all the complexities that holding another currency creates.

Let me know in the comments if you have any questions, comments or criticisms; I read every post. If you’d like to have a chat about a specific use case or project, then reach out to me on LinkedIn or my website.

Benjamin Jeater is a business, blockchain, and technology expert with over 10 years of experience. Benjamin runs his own blockchain consultancy and is the managing director of Foundations, a data-sharing platform for construction built on blockchain technology.