Blockchain, Bitcoin, and cryptocurrency often get bundled into one conversation. But if you buy Bitcoin, what exactly did you buy? Is there a coin somewhere? And where does blockchain come into it? The questions are simple; the vocabulary makes them harder. Let’s separate the pieces before we put them back together.
How Blockchain, Bitcoin, and Cryptocurrency Fit Together
These are three different things:
Blockchain is a way for a network to keep a shared digital record.
Cryptocurrency is a type of digital asset. Bitcoin and XRP are both cryptocurrencies.
Bitcoin is one particular cryptocurrency. Its abbreviation is BTC. XRP is a different cryptocurrency, not a fraction or version of Bitcoin.
The words are connected, but they don’t mean the same thing. Once that clicks, the rest becomes much easier to follow.
What is a Blockchain?
A blockchain is a digital record shared across a network of computers. New transactions are grouped into blocks, and each block is connected to the one before it. That connection helps the network keep track of what happened and in what order.
You don’t need to get a blockchain to keep these records. The network maintains them. Bitcoin has its own blockchain, which records confirmed Bitcoin transactions. Other cryptocurrencies use their own networks and records. We’ll look at what it means to send cryptocurrency a little further down the page.
What is Cryptocurrency?
Cryptocurrency is a broad term for digital assets that people can transfer using computer networks. Those transfers are recorded on a blockchain or a similar shared digital record. The word “coin” is common, but it does not mean there is a metal coin somewhere.
Bitcoin and XRP are both cryptocurrencies, but neither is a part of the other. XRP is not a type of Bitcoin. If someone says they bought Bitcoin, they mean the cryptocurrency named Bitcoin, also abbreviated as BTC. If they bought XRP, they bought a different cryptocurrency. “Cryptocurrency” is the broad category; “Bitcoin” and “XRP” are specific names of different cryptocurrencies.
What is Bitcoin?
Bitcoin is a specific cryptocurrency. One bitcoin means one full unit of that digital currency. BTC is its abbreviation.
You can buy a small amount of the cryptocurrency called Bitcoin without buying one full unit. Pictures of gold Bitcoin coins are symbolic. The cryptocurrency itself is digital.
What Happens When You Send Cryptocurrency?
To send cryptocurrency, you need a receiving address that works with the asset and its network. Bitcoin transfers are recorded on the Bitcoin network. An XRP transfer is recorded on the XRP Ledger. Other cryptocurrencies may use their own network or one they share with other assets.
Nothing physical travels. The network checks and records the transfer, and the recipient can use the amount after it is confirmed. Say you are going to pay for something with cryptocurrency. You use your app or service to authorize a transfer to the recipient’s compatible address. The network verifies the transaction is valid, including that you can spend the requested amount, and records it. Once the transfer is confirmed, the recipient can use the cryptocurrency received.
Can You Turn Cryptocurrency Into Cash?
Yes, if a service supports that cryptocurrency, the recipient may be able to sell it for dollars and withdraw the money. Receiving cryptocurrency and receiving dollars are two separate steps.
The dollar value can change between those steps. If someone sends cryptocurrency worth $100 when they pay, its value could be higher or lower by the time the recipient sells it. Selling fees may also reduce the amount they receive.
Putting the Pieces Together
Blockchain is a digital record of transactions shared across a network of computers. Cryptocurrency refers to a category of digital assets that can be transferred using blockchain networks. Among the various types of cryptocurrencies, Bitcoin and XRP are two examples. Purchasing XRP means you own a specific cryptocurrency called XRP, while buying Bitcoin means you own a separate cryptocurrency called Bitcoin.
Curious what people actually do with cryptocurrency? Explore “Uses for Crypto” next.
Learn More From These Sources
- NIST: Blockchain Technology Overview explains the shared digital record.
- FINRA: Bitcoin Basics explains Bitcoin, fractional amounts, and risks.
- XRP Ledger: What is XRP? explains XRP and the network that supports it.
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