Coins and Tokens both are cryptocurrency.But they refer to two completely different concepts.There are quite a few difference between them.So why many cryptousers confuse coins and tokens and what is the crucial difference between them?
Before understanding the difference first you need to know about
Altcoin (Coin)
Blockchain
ICO
COINS
While a coin—Bitcoin, Litecoin, Dogecoin—operates on its own blockchain, a token lives on top of an existing blockchain infrastructure like Ethereum.
Coins (that are also often called altcoins or alternative cryptocurrency coins) are digital money, created using encryption techniques, that store value over time. Basically it is a digital equivalent of money. Bitcoin is the most famous.
A blockchain is, at its simplest, a record of transactions made on and secured by a network. So while coins have their own independent transaction ledgers, tokens rely on the underlying network’s technology to verify and secure transactions and ownership. In general, coins are used to transfer wealth.
Bitcoin is based on blockchain — public and distributed digital ledger, where all transactions can be seen. Data is stored collectively and shared between participants of blockchain network. Blockchain guarantees transparency and reduces fraud. There are coins based on Bitcoin’s original protocol, created by Satoshi Nakamoto and opened to the public (Litecoin, Namecoin) and coins that operate on blockchain.
The main characteristics of coins are:
1) they are tied to public-open blockchain — anyone is allowed to join and participate in the network;
2) they may be sent, received or mined.
3) coins can be used anywhere.
Overall, coins have the same characteristics of money: they’re fungible, divisible, acceptable, portable, durable and have a limited supply.
Token
Tokens are digital assets, issued by a blockchain-based project, which can be used as a payment method inside of its ecosystem, performing similar functions with coins. However, the main difference is that it also gives the holder a right to participate in the network.
Tokens can also perform the functions of a digital asset or represent a company’s share,give access to the project’s functional and many more — with the launching of new projects unknown facets of tokens’ functional are discovered.
For example, is a “real-life token” — you may use it at a certain time, at a certain place. You can’t go to the restaurant and pay your bill with concert ticket — ticket has its value only at concert hall. Digital tokens are the same — they have certain use case only inside certain project.Tokens represent an asset or utility.
Creating a token is easier than creating a coin, as you don’t have to create a new code or modify already existing one — you just use a standard template from platforms like Ethereum, that are blockchain-based and allow anyone to create tokens in just few steps. Using a template for creating tokens provides smooth interoperability, so users can store different types of tokens in one wallet. Ethereum was the first to simplify the process of creating a token, being not the last reason why tokens flooded the market.
Conclusion
Tokens and coins are two words that are used commonly in the cryptocurrency space.Coins are just method of payment while tokens may present a company’s share, give access to product or service and perform many other functions.Coins are currencies that can be used for buying and selling things. You can buy a token with a coin, but not vice versa. Coin operates independently, while token has a specific use in the project’s ecosystem.Hopefully, you won’t be caught misusing these terms now that you’ve understood the difference between them. As always, happy investing!
