The idea behind inventing crypto coins was to create a currency that operates on a decentralized system without issues of trust rising. First, let us take a more in-depth look at how crypto coins are different from fiat currencies. Fiat currencies are controlled by the government through various banking institutions.
However, after the economic crisis that hit the world between 2007-2009, many people lost trust in the government and banking institutions. This economic recession was one of the factors that sparked the need to develop a crypto coin. Bitcoin was the first crypto and was launched in 2009. Crypto technology has been on the rise since then.
What is a Blockchain?
There are different definitions of the term blockchain. However, in the crypto world, blockchain defines a digital ledger where transactions are stored. Each chain in the blockchain contains a series of transactions that occur in the blockchain. According to this useful source, transactions are distributed to all the computers in the system.
Every new transaction that occurs in the blockchain is distributed to all computers in the network. Each transaction is added with an unchangeable crypto signature to it. As such, it is difficult to crack through the transactions or edit them after they have been saved.
Features of Blockchain Technology
The main idea behind blockchain is to develop integrity. Each entry made to the blockchain is timestamped. Each participant in the distributed system gets a copy of any new transaction added to the blockchain. Transactions added to the blockchain cannot be changed, and as mentioned before, each transaction contains a crypto signature to it.
The identity of users making transactions on the blockchain is anonymous. Unlike fiat currency banks where the government can keep track of your finances, decentralized systems are quite different. The transactions are kept anonymous and government institutions cannot track your crypto trades.
The Difference Between Crypto Coins and Blockchain
Blockchain is the tech behind crypto coins. More often than not, people confuse and interchange the two words when meaning the other. Crypto coins are digital currencies that operate on the blockchain.
A couple of steps are involved before a transaction is added to a blockchain. First, a transaction is requested and authenticated. After that, a block is created to represent the transaction and sent to all the participants in the network. Many times, crypto experts are added to the participants in a network as nodes.
Each participant in the network verifies the block. Each participant receives a token in the form of a crypto coin for verifying a transaction on the network. The transaction is added to the blockchain and the update is shared across the network.
Centralized vs. Decentralized Systems
Over the past couple of years, there has been a feel that crypto is slowly being turned into a centralized system. This has happened as large corporations have invested in crypto mining farms. As such, large businesses are now the owners of large amounts of crypto coins. Decentralized systems have been created to try and protect crypto coins from being centralized. Decentralized systems offer cheaper and faster transaction rates compared to centralized systems.
