Differences between crypto and token

Differences between crypto and token

By Roberto D. | CryptoFarm | 25 Aug 2019

Crypto enthusiasts know very well that there is a general tendency to define any virtual currency built on the basis of cryptography as "cryptocurrency", but it also knows just as well how misleading this trend is; a neophyte, on the other hand, is a sacrificial victim of this tendency and before reaching a more in-depth knowledge of the subject he ends up taking years even by virtue of this kind of misunderstanding.

Cryptocurrencies, in other words, are not all the same and there are indeed many different types of crypto in circulation; the first distinction, which is also the most trivial, must be made regarding the difference between cryptocurrencies proper and tokens.

While tokens have neither their own network of nodes nor their own blockchain (but use those made available by other projects), a cryptocurrency proper has a network of nodes and its own blockchain.

In addition to this distinction we should then distinguish, as far as tokens are concerned, those coins that we could define as "service" coins from those which are instead simple alternative means of payment and from those, still different, which behave substantially like bonds; the typical example of service tokens, so to speak, are those created by football clubs, through which it is possible to buy tickets and merchandising.

Then there are tokens that have the ambition to become real currencies, means of payment for the Internet world, as in the case of BAT, whose purpose is precisely to become the currency that will regulate transactions between content creators and the world of advertising, becoming in a sense the unit of measurement of the digital product.

(I talked about bat HERE)

Then there is the case of tokenization, as in the case of the real estate market; in this case, therefore, the token behaves like a sort of obligation, guaranteeing a certain profit in a certain period of time.

We can then still distinguish between decentralized currencies and centralized currencies, or between permissionless and permissioned currencies, if you prefer; the difference lies, essentially, in the fact that in the first case (permissionless coins, as in the case of bitcoin) we have a public infrastructure, devoid of hierarchies and with no restrictions whatsoever on access, in the second case (permissioned coins, among which we could mention pounds, given that the facebook currency has attracted so much attention in the media) the infrastructure is characterized by the presence of one or more central authorities.

All these differences, which in the eyes of a neophyte may appear to be trivial, are in fact substantial differences; referring to any cryptographic currency using a generic term such as "cryptocurrency" is basically a simplification.

Moreover, this is extremely important because in the absence of adequate terminology the real risk is that it will not be able to create a regulatory framework that is adequate to the needs of the industry; in terms of regulations, in fact, it is simply foolish to think of being able to write rules that can adequately regulate both the token market and the cryptos market, both permissionless and permissioned coins.

Roberto D.
Roberto D.

Born in Italy, I live in Italy, passionate about cryptocurrencies since I discovered ethereum in 2015 Telegram channel: https://t.me/dumbwaystoearn


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