A question that often comes up in discussions about blockchain is, “Are blockchain and cryptocurrencies the same thing?” If you’ve ever wondered about this yourself, you’re not alone. This short post will help clarify the difference between these two related but distinct concepts. By the end, you should have a clear understanding of how blockchain and cryptocurrencies relate to each other.

The short answer

For those who want the quick version: No, blockchain and cryptocurrencies are not the same thing.

Here’s a simple analogy to help explain:

Blockchain is like an engine, while cryptocurrencies are just one type of vehicle that engine can power. Blockchain is the underlying technology, and cryptocurrencies are one of its many potential applications.

If that satisfies your curiosity, you can stop here. But if you want to understand the difference in a little more depth without getting too technical, read on.

So, what is a blockchain?

At its core, you could say a blockchain is a special type of database that records transactions across a network of computers. But what makes it unique?

Distributed: Unlike traditional databases controlled by a single authority, a blockchain is spread across multiple computers. This makes it a type of “distributed ledger technology."

Secure and Immutable: Information on a blockchain is extremely difficult to change or hack. Here’s why: Transactions are grouped into “blocks.” Each new block is connected to the previous one, forming a chain. To change data in one block, you’d need to change all the subsequent blocks too - a nearly impossible task.

Transparent: Anyone can view the transactions on most blockchains, though the identities behind the transactions are often anonymous.

Decentralized: No single entity controls the entire network. This distributed control is a key feature that sets blockchain apart.

Blockchain technology was first introduced with Bitcoin in 2009, but it has since evolved to have numerous applications beyond cryptocurrencies. Today, it has applications in finance, supply chain management, digital identity and more.

Here are some examples of well-known blockchains:

  • Bitcoin: The first and most famous blockchain, primarily used for digital currency.
  • Ethereum: Known for its ability to run “smart contracts” and host other cryptocurrencies.
  • Avalanche: Focuses on fast transaction speeds and low costs.
  • Tron: Popular for decentralized applications (dApps) and digital content.
  • Celo: Aims to increase financial inclusion through mobile-first design.

For a more complete list of blockchains, you can check out the chains list on DefiLlama.

Cryptocurrencies

Cryptocurrencies(crypto) are a form of digital asset that only exists on blockchains. When people speak about cryptocurrencies, there’s usually no actual distinction mentioned between the different types. However, there are various types, each with a specific purpose.

Here is a simple breakdown:

Native Tokens: These are digital currencies like Bitcoin (BTC), Ether (ETH) and Celo (CELO). These operate on their own blockchain networks and function mainly as a medium of exchange or a unit of account.

Tokens: These are built on existing blockchain platforms (like Ethereum) but do not have their own blockchain. They can represent various assets or rights and are used in specific ecosystems. Utility tokens, which give holders access to a product or service within a specific platform or network, fall under this category.

Governance Tokens: These are tokens designed to give holders voting rights within a decentralized organization or protocol. Holders can vote on changes or proposals related to the project development. Examples include Uniswap’s UNI token and Mento protocol’s MENTO token.

Stablecoins: These tokens are designed to maintain a stable value by maintaining a peg to an asset like the US dollar or gold. Examples include Tether (USDT) and the Celo Kenyan Shilling (cKES).

Security Tokens: These represent asset ownership, such as company or real estate shares. They are subject to securities regulations and give holders certain rights, like dividends or voting power.

Memecoins: These are tokens that are created inspired by memes or internet culture. In most cases they have no use case. Memecoins have gained a lot of popularity, however they carry significant risk due to their speculative nature and lack of fundamental value.

It’s important to note that all types of cryptocurrencies, not just memecoins, can be subject to scams and high volatility. Always do research and understand the risks before investing.

Blockchain & Cryptocurrencies

Now that we’ve explored both blockchain and cryptocurrencies, it should be crystal clear that they’re not the same thing. Blockchain is the underlying technology, while cryptocurrencies are just one of its many applications.

An important point to remember is that blockchains can exist without cryptocurrencies, but cryptocurrencies can’t exist in their current form without blockchain technology.

It’s important to note that there are multiple types of both blockchains and cryptocurrencies, each with its own characteristics.

Multiple blockchains: Bitcoin, Ethereum, Avalanche, Tron, Celo, and many more are all developing their own versions of blockchain technology.

Various cryptocurrencies: From Bitcoin to utility tokens, stablecoins, governance tokens, and even meme coins like Dogecoin.

Each blockchain and each cryptocurrency has its own unique features and use cases. So, the next time someone asks you if blockchain and cryptocurrencies are the same thing, you can confidently explain the difference.