As a novice, when we entered the world of crypto sphere, most of us encountered certain technical terms like coins, tokens, altcoins etc. After a quick glance, we moved over to more complex information. But did we ever try to understand the difference between them? Are coin and token the same? Are they synonymous? Let’s find out!
In general, it is an encrypted digital currency especially meant for trading, used for storing value and payment of services. It can be used as an alternative to physical money. They are cryptocurrencies, which operate independently, Blockchains on their own and don’t require any other platform. Examples are Bitcoin, Ethereum and Bitcoin Cash.
While Bitcoin (BTC) is the most common cryptocurrency coin around the world, there are more than 914 coins in existence. They are fungible as one unit is equivalent to another and divisible as they can be divided into smaller units of value. Also, they are widely accepted as medium of exchange and almost all versions of the same denomination have the same value. Further, Coins can be carried along and exchanged, and can be used number of times without degrading.
Cryptocurrencies like Monero were not generated on Bitcoin’s code base but are stated as coins. This is so because they were produced on their own Blockchain but encompass all the properties of a cryptocurrency coin. While, Blockchains like Ethereum and Ripple exhibit the properties of currencies and must fall in the category of coins, but they are not solely used for trading or payment.
In simple terms, one can consider cryptocurrencies as the parent category and coins/altcoins/cryptocoins are under cryptocurrency as one sub-category and tokens as another. On the other hand, it is comparatively easy to differentiate tokens from cryptocurrency coins.
Tokens require a platform such as Ethereum to exist and operate. Examples are Auger, Omisego and Golem and they are built on Ethereum Platform. There are other platforms too, where one can build Token and is not restricted to Ethereum.
Tokens offer a method to outline a protocol. And it also provides a way to fund the operational expenses needed to host it as a service. While Ethereum and Bitcoin have numerous servers or miners around the world that can run their networks and deliver mining rewards. Also, tokens deliver a model that can generate shared computing resources such as computing, databases and file storage. Meanwhile, they also maintain the decentralized resources in a controlled manner and are independent of any organization that can maintain them.
Tokens are like Initial Public Offering (IPO) for stocks. Projects are initiated in ICO after crypto-tokens are issued on the Blockchain. This gives investors an opportunity to obtain tokens early in trade for cryptocurrency. Tokens provide functionality, which are over and above of digital cash. They can offer value to investors, which could be rather beyond speculative returns. It has utilities to cast votes by the community on key business decisions, or even technical changes to the platform.
The most common objective of a cryptocurrency coin is to behave like money that can be used as a store of value, unit of account and medium of transfer. Blockchain tokens are valuable but they cannot be used or considered as same money in comparison to cryptocurrency coin.
Coins are considered as innate Blockchain tokens like Bitcoin (BTC), Monero (XMR), Litecoin (LTC), and so on. While Tokens are generated on another Blockchain like Waves: 2.0 protocols or Ethereum that lets users generate them using the core coin.
We hope you now understand the basic difference between a coin and token. If you have anything to share, please comment in the section below.