Blockchain 2.0: Difference between a token vs a coin.

cryptocurrency

A coin is a Cryptocurrency which operates independently of any other platform. For eg. Bitcoin, Dash and Litecoin. A token is a cryptocurrency which requires another platform, such as Ethereum, to exist and operate. Coins are standalone cryptocurrencies that do not require another platform to run, whereas tokens are actually built on other platforms and they exist on that platform.

Cryptocurrency, altcoin and crypto tokens are often erroneously used interchangeably in the virtual currency world. However, cryptocurrency is the superset (the main thing), and altcoins and crypto tokens are its two subset categories within the mix.

A cryptocurrency is a standard currency used for making or receiving payments on the blockchain, with the most popular cryptocurrency being Bitcoin.

Altcoins are the various alternative cryptocurrencies that were launched after the massive success achieved by Bitcoin. The term means alternative coins—that is—other than bitcoins. They were launched as enhanced substitutes of bitcoin with the claims to overcome some of the pain points of bitcoin. 

The common examples of altcoins are litecoin, dogecoin, etc. Though each has tasted varying levels of success, none have managed to gain popularity like bitcoin.

Crypto tokens represent a particular tradable asset or a utility created over an initial coin offering (ICO) that is often found on a blockchain. That is most token are not built in an independent blockchain but are built in an existing blockchain.

What you should know.

Cryptocurrencies are digital currencies used to facilitate transactions (making and receiving payments) along the blockchain. Altcoins and crypto tokens are types of cryptocurrencies with different functions.

Why you should know.

A token is also called a crypto assets, and are special kinds of virtual currency that reside on their own blockchains and represent an asset or utility. Most often, they are used to fundraise for crowd sales, but they can also be used as a substitute for other things. For example, one can have a crypto token that represents anything on a blockchain that is used to manage or taken in exchange for a service or give access to privileged service. Example, there can be a crypto token that gives entitlement to a have a free access to multiple classified films on a blockchain.  A crypto token may also represent other cryptocurrencies, such as a crypto token being equal to 20 bitcoins on a particular blockchain. Such crypto tokens are tradable and transferrable among the various participants of the blockchain.

Why it’s important.

Tokens are also a medium of exchange, but with a far more focused purpose. Where coins compete in an arena with countless participants due to their largely singular ambition, tokens are a type of instrument that are useful in specific markets or even single businesses. They’re created in a more derivative fashion with an initial token sale (ITS) and built upon an existing blockchain that supports smart contracts like Ethereum. By funding the contract with the more liquid underlying coin, investors receive tokens from the business running the offering. These companies recognize that they can serve customers in a specific niche better by creating a tokenized model, and the tokens are how customers will participate in the service that will eventually be built with this new found capital.

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Published by Iykeman

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