A common misconception is that blockchain and crypto are the same thing, which they’re not. Today we’re going to explain blockchain in the simplest way for you to understand their key differences.
Stories are a great way to simply seemingly complex ideas. So, let’s use a train analogy to illustrate blockchain.
Blockchain is like the tracks on which the train runs. It’s the process and foundation in place that allows cryptocurrencies (the trains in this example) to function.
Blockchain is a system of recording information which is difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
A Blockchain is a chain of blocks that contains information. So, like train tracks, new tracks get added every time. These “tracks”, chains of information, contain information about the Sender, Receiver, number of transactions, etc. As new blocks are added to a blockchain, the blockchain evolves to become more secure and faster.
Here’s why blockchain is important:
Saves time: It allows for quicker transactions as it does not need a lengthy process of verification, settlement, and clearance.
Avoids tampering: Any new block added to the chain of ledgers cannot be removed or modified.
Security: If someone tried to hack the blockchain, they would need to hack every single computer connected to it which would be impossible.
Transparency: Changes to public blockchains can be viewed by everyone.
Easy transactions: You can transact directly with a friend or family member without the need for third parties.
The reasons above are why blockchain technology is used for more than just cryptocurrency. It’s also used in:
- Finance and Accounting
- Technology and Internet of Things
Of course, the most common use of blockchain technology has been Bitcoin – the most popular cryptocurrency in the world. It was created in 2009 by someone named Satoshi Nakamoto and allows anyone to purchase and use it without paying any process fees. Senders and receivers transact directly without using a third party.
Blockchain is the technology behind Bitcoin. Bitcoin is the digital token, and blockchain is the ledger that keeps track of who owns it. You can’t have Bitcoin without blockchain, but you can have blockchain without Bitcoin. The same way you can have train tracks without a train, but you can’t have a train without the tracks!
We hope this helps you gain a better understanding of blockchain. Stay tuned for our next blog coming soon and feel free to drop us a comment below if you have any questions.