As a newbie in the cryptocurrency space, it’s normal for you to get confused of the difference between coins and tokens. In most cases, you’ll see these two terms often used interchangeably in cryptocurrency platforms and blogs. At any point, they may seem alike and similar, but they aren’t the same. The first thing you should know is that both crypto coins and tokens are digital assets and are extensively different concepts in the crypto ecosystem. This article explains the difference between crypto coins and tokens.
What is a Crypto Coin?
A coin in cryptocurrency is any digital asset that has a single blockchain system. Primarily, a coin originates and plays by the rules of the blockchain. For this reason, many people refer to a coin as the currency of that blockchain. Asides from being a currency, a crypto coin is a means of exchange as well as a means of saving passively. Great examples of crypto coins include the most popular Bitcoin, Ripple, Ethereum, among many others. Some features common to most crypto coins include;
- They are primarily decentralized entities
- They depend on a blockchain
- They follow the cryptocurrency graph system.
You can use crypto coins in many ways. In most cases, you can even liken a coin to the regular money you have, as you can use it to pay for items. Some ways to use crypto coins include;
- Money Transfer
- Token building (Ethereum)
- Making network decisions (Dash)
What is a Crypto Token?
The primary difference between crypto coins and tokens is the blockchain difference. Tokens do not have their single blockchain; they always depend on already existing blockchains. Since they’re built on an existing blockchain, it doesn’t mean that it’s easy. The process of creating a crypto token is not a job for a newbie in any way. In most cases, these tokens are built by a blockchain network. The most popular token platform in the crypto world is Ethereum. Ethereum blockchain supports tokens the most because of its affiliation with smart contracts. There are many types of tokens on the Ethereum network, like NEO and DAI, but the original Ethereum tokens have a family name, ERC-20. An example of a token is Fanspel, which is used to power the first blockchain-based fantasy platform of the same name. If you create a token on a blockchain, you’ll require other miners on that blockchain to endorse the existence of the token. Some features of crypto tokens include;
- They are guided by a set of programs, features, and rules provided by smart contracts.
- They are open to almost everyone but can’t be controlled by anyone.
- The tenets of most tokens are visible to everyone.
Like crypto coins, tokens also have their uses. Some of the uses of a crypto token include;
- Value transfer
- Investment proofs
- Product/service access
As a newbie in cryptocurrency, the most significant difference between crypto coins and tokens is the blockchain feature. A coin will have its blockchain, while a token will rely on that blockchain. However, in most cases, tokens perform some duties of cryptocurrencies and even some more.