I should probably start every single post on this website with the disclaimer that I am not an expert in blockchain or cryptocurrency. That being said, I’ve read a lot about this stuff and this question about the difference between blockchain and cryptocurrency is extremely common. It is an inevitable conversation that I have with friends and colleagues whenever Bitcoin comes up, and it’s important to understand if you want to start learning about cryptocurrencies in the clean energy industry.
30,000 Foot View of Cryptocurrency and Blockchain
At a very high level, a cryptocurrency is a currency (or maybe a utility token or security depending on the specific use case, regulatory oversight, and semantics) that is built on a blockchain. For now let’s ignore the fact that the distinction between a currency, a utility token, and a security are important and constantly evolving. Unfortunately, that definition doesn’t make much sense without understanding what a blockchain is. But the general relationship between the two is that a cryptocurrency is built using blockchain technology. Blockchains can be used for way more than just cryptocurrency. But a cryptocurrency is defined by it’s use of blockchain. Blockchain has a lot of potential uses in the energy industry separate from cryptocurrency.
How Is Bitcoin Related to Blockchain
It’s almost necessary to talk about Bitcoin when learning about Blockchain. Bitcoin is generally the headline that people see, and it is currently the most “valuable” cryptocurrency by far (more on crypto valuations to follow in later posts). There’s a wealth of information out there about how Bitcoin came to be in 2009, and how it kinda sorta works (more on Bitcoin here and here). If you’re not interested in that detail, here’s the general idea: Bitcoin was the first cryptocurrency and it is built on a special type of database called a blockchain. But what is a blockchain?
A Blockchain is a Database
A blockchain is literally just a database with some special rules. In general, the rules are set up such that a blockchain represents an encrypted, immutable (read: unchangeable), distributed ledger (read: list stored on lots of different computers) of some information. That’s it. The gory details of how it gets done are interesting and complex. But at the end of the day, a blockchain is just a database with some special rules. Why is Bitcoin important? Because it was built on the first ever blockchain!
So what’s the benefit of a blockchain? The biggest benefit that most people in the crypto world quote is the elimination of trust. By that they mean that you no longer have to trust a central authority to process transactions. When applied to currency, the central authority is a bank. A blockchain represents a distributed record of every transaction between all parties on a particular network, so it essentially removes the need for some central authority to act as a trusted third-party to approve transactions between two parties. However, I would argue that this benefit isn’t really removing trust. Rather it is removing middle-men in transactions. You still have to trust the rules and implementation of the blockchain.
So Much More to Learn
There you have it. A short overview of the difference between those two pervasive terms: cryptocurrency and blockchain. But there’s still so much more to learn! How does a blockchain actually work? What is the difference between a cryptocurrency, a utility token, and a security token? This article mentioned that blockchains can exist outside of cryptocurrencies, but what does that look like? Great questions. I don’t know most of those answers myself yet (and some might not even have a prevailing “correct” answer), so I’ll go do some research and I’ll write up whatever I find!
Donate Bitcoin to this address
Scan the QR code or copy the address below into your wallet to send some Bitcoin
Donate Ethereum to this address
Scan the QR code or copy the address below into your wallet to send some Ethereum