Demystifying blockchains, cryptocurrencies and smart contracts!
What’s the difference between blockchains, cryptos and smart contracts? Let’s find out more in this post
In the previous post, I gave you an introduction to blockchain. In this post, let’s tackle the differences between - blockchains, cryptocurrencies (cryptos) and smart contracts.
I will use a real-world analogy to explain the difference.
Highway, Vehicles, Governing Organization
Let’s use something we are familiar with and use almost regularly - highways (or) expressways.
A highway provides the infrastructure for vehicles to move from one point to another. It has the necessary provisions in place for safe movement of vehicles.
Each vehicle serve a purpose. For example, cars transport people, trucks transport goods and so on.
A governing organization (like NHAI in India) puts in place necessary guardrails, toll infrastructure and rules for highway usage. Examples of this could be the speed limits, toll charges, lane distinction and so on.
So in this example:
Highway - offers infrastructure for movement of vehicles
Vehicle - carries payload and serves a specific purpose
Governing organization - implements controls around the usage of highways
Blockchain, Cryptocurrencies, Smart Contracts
Using the highway example as reference, here are the similarities in the blockchain world.
Blockchain - offers the platform that is decentralised, immutable and secure that serves a single source of truth (distributed ledger) that can be used by participants to interact with each other
Cryptocurrency - a specific use case implemented using blockchain, which enables exchange of value between users. Implementation is specific to a blockchain platform - for example bitcoins, ether and so on
Smart Contract - a piece of code represented as a contract, that resides on blockchain and implement rules of platform usage. Think of it as software that controls and regulates the interactions on a blockchain platform
So to compare with our analogy:
A blockchain is akin to a highway that offers a platform where exchange of value happens
Cryptocurrencies are similar to vehicles that embody the value exchange
Smart contracts are like the rules of usage implemented in real world by a central authority. But in the blockchain space, such contracts are decentralised as well
I hope it clears any doubts around these 3 terms, which is essential in understanding the ecosystem.
The next time someone uses one of the terms incorrectly, you know what to do right?
Signing off until next time! Stay safe. Stay hungry. Stay foolish.
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