Cryptocurrency and Blockchain are two related concepts that work hand-in-hand. Many of the successes recorded in the cryptocurrency market are due to its reliance on a major technology- Blockchain.
Blockchain: Technology behind Cryptocurrency
For those who have been in the cryptocurrency market for a long time, blockchain technology is no news to them. As a result, many crypto enthusiasts know as much about blockchain technology as they do about cryptocurrencies. For others, it isn't easy differentiating between cryptocurrency and Blockchain.
While these two terms may seem alike because they often appear in the same sentence, they mean different things, especially for those who buy Dogecoin on paybis. For example, cryptocurrencies are digital currencies that have a unified value globally. Unlike conventional fiat currencies, digital currencies are not controlled or regulated by any central authority.
On the other hand, Blockchain is a database of information upon which transactions in digital currencies take place. Understanding what blockchain technology is and how it functions is essential for the beginner who wants to get into the cryptocurrency market. With this understanding, you can make the most of your cryptocurrency investments.
What Is Blockchain and How Does It Function?
The best way to understand what blockchain technology is to see it as a database. A database is a platform or system that stores data till they are needed for further processing. However, unlike the many other databases, Blockchain works uniquely.
Information on the Blockchain is stored in groups often referred to as blocks. These blocks are connected to themselves in a chain-like manner which is why it is called the Blockchain. These blocks of information are available to users across different computer networks. However, unlike regular databases, Blockchain is highly decentralized.
By decentralization, no one can claim ownership of information, and activities on the Blockchain can be done without the help of a third party. As we will come to see later, the decentralized nature of the Blockchain is why many cryptocurrency-related activities are carried out on it.
Worthy of note is the security of information entered in the Blockchain. However, altering information provided on the Blockchain is near impossible. This is why it is difficult to reverse transactions carried out on the Blockchain; this is both the strength and the weakness of the Blockchain.
To alter any information on the Blockchain, every block of information preceding it will be affected. An attempt to alter information on the Blockchain is an effort in futility, even before you commence it.
The Relationship between Blockchain Technology and Cryptocurrency
From the first digital currency - Bitcoin - created in 2009, the cryptocurrency market records over 11,000 digital currencies in circulation. Have you ever paused to think - why the exponential increase in so short a time? The simple answer to that is that the cryptocurrency market leverages the Blockchain for growth.
In the early years of the rise of Bitcoin, one of the many challenges it experienced was the activities of hackers, crackers, and scammers. It was reported that people were using digital currencies to facilitate money laundering. Relying on third parties for transactions also meant some people had to be scammed of money.
All of these security-related challenges were almost drowning Bitcoin until certain measures were put in place. One of such measures is the introduction of Blockchain - a decentralized database that records information in blocks.
Since then, many cryptocurrencies have been built and sustained on this transforming innovation - blockchain technology.
Ethereum, the second most traded digital currency, has leveraged Blockchain to create smart contracts. Other virtual currencies have created their blockchain platforms as well. The transforming power of blockchain technology continues to provide a solid foundation upon which digital transactions thrive globally.
How Does Blockchain Benefit the Cryptocurrency Market?
The benefits of Blockchain to the cryptocurrency market cannot be overemphasized. While several of these benefits exist, transparency seems to be the most important. Since the introduction of Blockchain, transactions have been more accurate and transparent. As a result, traders do not have to go through third parties to manage their cryptocurrencies, as the Blockchain gives them full control of that.
The creation of decentralized apps, popularly referred to as dApps, resulted in the market's massive growth. Many startups, through these apps, have been able to design an initial coin offering for their businesses and make tokens available to the public. As a result, blockchain moves digital currencies up the technology ladder and creates a brighter future for different cryptocurrency networks.
Then, there is the global acceptability of digital currencies. Despite the high volatility of cryptocurrencies like Bitcoin, Ethereum, Dogecoin, and Litecoin, the market records an influx of traders. As a result, experts have opined that it is impossible to separate the impact of Blockchain from the growth and global acceptability cryptocurrencies have enjoyed over the years.
Interestingly, beyond cryptocurrencies, many sectors have started embracing the many opportunities blockchain offers. For example, music, sports, entertainment, and fashion industries are examples of sectors leveraging Blockchain and investing in the cryptocurrency market.