Blockchain and cryptocurrency are two hot, yet often confusing topics in tech education. It is all but certain that cryptocurrency is here to stay. Just like email and e-commerce rose from obscurity to become everyday norms, so it is anticipated that cryptocurrencies shall replace conventional currencies soon. Blockchain, on the other hand, is the ledger technology that underpins the operation of cryptocurrencies such as Bitcoin.
It is apparent that crypto has now become a tool to make a quick buck from; buy low sell high. It’s why the price of bitcoin (BTC: USD) is hovering above $9,500 most recently. Ethereum (ETHUSD=X) is currently at $272 and could move higher or lower on the whims of investors. It’s safe to say that those prices are beyond the margins of what 95% of the world’s population can afford. Furthermore, there are now over 5000 altcoins with a market cap of about $285 billion, and it seems most are being created for the sole purpose of making money off buyers.
The concept of a decentralized, permissionless, peer-to-peer, borderless exchange system is a plausible one according to the original vision of Bitcoin’s creators. Furthermore, the blockchain system undergirding BTC and on which thousands of other cryptos ride upon is useful for transacting in specific industries such as healthcare and film. But, certainly, we are still far from a world where billions of people can access a decentralized system of exchange, especially where the Fed has jumped on the digital currency bandwagon.
This article will be of immense value to students who want to understand the differences between blockchain and cryptocurrency. As a student, if you go to any site that writes essays for you, the likelihood of not finding blockchain as a hot topic to write about is next to nil. If you have an informative essay to write on these topics, this is a good place to start.
Blockchain: Immense Value Creation for All Industries
The cryptocurrency framework is powered by blockchain, which is where the focus should be. The main driver that led to the development of the blockchain system was decentralization as a utility of transactions.
With assets such as currency (or even your birth certificate) that are issued by a centralized authority such as the Federal Reserve, there is a lack of faith, and in some cases, transparency in the system. With blockchain, there is a decentralized ledger that allows fast initiation, tracking, validation, record keeping, and time stamping of transactions.
But here’s the key; these transactions don’t necessarily have to do with currency or money. From the perspective of currency, as we’ve come to know it, money can simply be created out of thin air for specific purposes. Otherwise, how would governments be able to offer trillions of dollars seemingly overnight to cover bailouts and to sustain other economic mechanisms? Or completely wipe out debts in an instant?
In this sense, a record has been altered for the benefit of the controlling or issuing authority. Such a lack of transparency simply isn’t possible with a crypto-system running on a blockchain.
Blockchain Networks Generating Social Benefit and Change
With a blockchain-inspired system, transactions are validated and authorized by everyone. Meaning one can’t change facts at their convenience. If a book has only three authors, it is much more difficult to know what is fact and what isn’t. That compared to a public Wikipedia domain on which there are potentially thousands of editors and information can be verified by anyone. This is the limitless potential of blockchain.
A blockchain ledger is practically impossible to alter since every block is linked to the previous one. Therefore, imagine a government’s treasury running on such a system in which all aspects of procurement, tendering, and issuance of securities are linked to each other. It would not only make information and records impossible to falsify or alter, but it would also drastically reduce spending on audits.
For a system to be considered as ‘blockchain,’ it has to show major characteristics such as:
- Running on peer-to-peer networks.
- Cryptography-since the network is open to everyone
- Consensus rules on adding new pages to the ledger (for example, BTC has proof-of-work; computers will need to solve math problems and display the proof to the network). This takes quite a bit of energy in terms of computing power (there may be other consensus rules that are simpler)
- Punishment and reward- the reward is a token (in the case of BTC, a coin that is added to the ledger). The punishment may be the coins being taken away or loss on computational power.
On of the standing examples of a public blockchain being created for socio-economic benefit is FreeWork, with its currency called DoIt. There are other such systems currently in the research phase that haven’t been realized yet. These will serve to show that cryptocurrency is only but a small part of the benefits of blockchain. This is where the real focus should be.