Both the terms “Tokens” and “Coins” are used as synonyms in the context of Cryptocurrencies. But they do have different concepts and usage! But still, why do many Crypto users still confuse between tokens and coins. They consider both the tokens and coins as just Cryptocurrencies.
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This misleading trend began after the introduction of Bitcoin. All the cryptocurrencies introduced afterward were referred to as both tokens and coins, even though most of them do not fulfill the necessary characteristics.
Tokens Vs Coins: An Overview
Features of Coins
Features of Tokens
Features content credit: https://blog.xsolus.com/cryptocurrency-coins-vs-cryptocurrency-tokens
What is a Coin?
Coins are the real Cryptocurrencies. They are normally referred to as altcoins or alternative Cryptocurrency coins. Bitcoin is a major example that falls under this category. Normally, altcoins are digital currencies that make use of Cryptography based encryption techniques. The bitcoins are not included in the altcoins category. These altcoins work in a decentralized format, and hence no third parties like banks or other financial institutions are involved in between. The transactions operate in a peer to peer format.
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All the financial records are stored in a distributed ledger called Blockchain. The data is stored collectively, and it’s shared between all the participants in the network. This procedure makes it more transparent and free from frauds.
Bitcoin was developed by an unknown person (or group of persons) named Satoshi Nakamoto and made it open-source. Hence, multiple altcoins work in the same protocol as that of the Bitcoin, namely, Litecoin, Peercoin, and Namecoin. Some examples of ones that operate based on Blockchain include Ripple and Monero.
Some significant characteristics of Coins are as follows:
Moreover, they are tied to a public-open blockchain. So it enables anyone to join and act in the network. Also, the altcoins can be sent, received or mined.
Examples of Coins: Bitcoin, Eteheruem, Ripple, Bitcoin Cash, Litecoin, EOS, Cardano, Stellar, NEO, Monero, etc.
What are Tokens?
Tokens are a little different concept when compared to the coins. A token is mainly tied to any Crypto Based projects. These tokens can be used only in and around the ecosystem of the project. But at the same time, it works as in the format of altcoins! Only the ones who have ownership of tokens will be given the right to participate in the network.
To explain it more simply, tokens can be compared to a pass for a particular event like an entertainment show. One can use the pass only for entering the entertainment show and cannot be used for buying vegetables from the market.
Token also operate similarly. They have a specific working space! To be more precise, tokens represents a utility or an asset. There are some kinds of unique tokens called security tokens. Security tokens act as a company’s share, whereas utility tokens act inside a certain project.
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Another advantage of tokens is in their creation. We don’t have to develop new codes or modify an already existing one. Instead, the platforms like Ethereum help us to make use of their standard templates. Creating tokens are just a few clicks away. Platforms like Ethereum have made the tokens more interoperable. This has resulted in the users storing multiple tokens in a single wallet.
Examples of Tokens: Tron, Bytom, Vechain, Ox, Omisego, Augur, etc.
“Also read the comparative guide on ethereum vs bitcoin”
Final Thoughts
Hope the article gave you an insight into the major differences between a token and a coin. They are used as synonyms in multiple contexts, even though they have different functions. The difference between an altcoin and a token should be made clear by the Cryptocurrency enthusiasts. To summarize the whole blog in a single line, one can buy tokens using altcoins and not vice versa! That is, coins can be used with more freedom, and tokens can be used only in a certain ecosystem.
Happy Crypto investing folks!
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