What is a blockchain in relation to cryptocurrency? I will use a couple of non-technical analogies to express the blockchain conceptually.
is to think of how the blockchain relates to the cryptocurrency industry overall. The first analogy is to think of a blockchain and cryptocurrency like a cake. Cakes are a category of dessert. A blockchain is a category of databases. All cakes essentially have the same ingredients or they wouldn’t be a cake.
Cryptocurrency in relation to the blockchain is the icing on the cake. Without all the ingredients coming together a certain way, there would be no cake and no need for icing. You don’t really need to break down the ingredients in the blockchain to understand cryptocurrency at this point.
However, understanding what the blockchain is and how it relates to cryptocurrency conceptually will help you make many more connections to possible investing opportunities.
Going down a little deeper into the technical aspect and how blockchain work is important as well. Technically speaking a blockchain is a type of database. Well, what is a database?
What is the blockchain?
With digital technology, it helps to think in terms of how it relates to or mimics the physical world. For example, a blockchain is a type of database in the digital world. A database, in a way, is like filing cabinets we use in the office. Therefore the second analogy is to think of a filing cabinet and how you use it to store information.
You have different drawers in the filing cabinet with different files organized in a certain way. for example, the files can be organized in alphabetical order.
When you want to retrieve a file (data), you think about what drawer it is located in, open the drawer and take out or retrieve the file. Think of a database as many many filing cabinets all chained or grouped together. using this analogy you can equate one drawer of the filing cabinet to one block withing the blockchain. Once in place, these blocks never move. ownership of the information on the blocks can be transferred over and over to different individuals.
Each time you go anywhere on the internet looking for information you are accessing a database that holds the information. The specific information you retrieve is equivalent to retrieving a file from the digital cabinet.
A blockchain is a is like a file in a cabinet with information in it. Each “block” can have a bundle or group of files in it. The information in the files cannot be altered by anyone. “it is tamper proof.” Being tamper proof or “unhackable” was the secret sauce that enabled bitcoin and currencies to begin.
How do blockchain and cryptocurrency relate to each other?
Think of them like cake (blockchain) with icing (cryptocurrency) on top.
What is a blockchain?
You can think of it as a digital drawer in a filing cabinet with many hundreds and millions filing cabinets all chained together.