Many people think that the concepts of “coins” and “tokens” are very close in meaning and are practically interchangeable. In fact, they mean different things. We will tell you how they are used and how they differ.
Digital coins exist only in electronic or digital form. They are intangible and cannot be stored in real wallets — only digital ones. You can manage these wallets through a smartphone, computer, laptop and other devices with an Internet connection.
Examples of digital coins
Here are some examples of digital coins:
- Bitcoin (BTC)
- Monero (XMR)
- Ethereum (ETH)
- Litecoin (LTC)
- Ripple (XRP)
- Cardano (ADA)
- Stellar (XLM)
There are thousands of different coins on the cryptocurrency market, but we have listed the most common ones. Take, for example, the first three digital coins from this list. Each of them has its own ledger, or blockchain. For example, Bitcoin runs on the Bitcoin blockchain, Ethereum (ETH) runs on the Ethereum blockchain, and Monero (XMR) runs on the Monero blockchain.
Where and how to use
Coin is often used as a payment system. How they are used:
1. Transfers. Fast, cheap and cross-border. This is a good distinguishing feature of the crypt from traditional payments.
2. In a number of countries, cryptocurrency can be used to pay for goods and services.
3. Coins are also a good trading tool. Here already according to your desires: Trading or investments.
If you take Bitcoin, then it has all of the above. But it has a limited number of applications, since Bitcoin is the first cryptocurrency.
Unlike digital coins, which are created on the basis of their own blockchains, tokens (also digital tokens or crypto tokens) are generated on the basis of already existing blockchains. They are digital assets that can be used within a certain infrastructure.
The platform for creating tokens is the Ethereum blockchain, which has gained popularity due to its smart contracts and decentralized applications. Tokens created on the basis of the Ethereum blockchain are called ERC-20.
ERC-20 tokens include Tether (USDT), EOS (EOS), Tron (TRX), Basic Attention Token (BAT) and others.
Benefits of using tokens
1. Many projects can be created on the network that offer a wide variety of services. They, in turn, can reach a huge audience and collect a large amount of information. This may allow the creation of a large knowledge base on the blockchain, where information cannot be deleted or changed.
2. Thanks to the significant functionality of decentralized applications, any project can be made a reality.
3. Users and creators can interact within the same network, which in turn minimizes risks and optimizes the services offered.
There are four main types of tokens that can be noted:
1. Token backed by a real product. Same as USDT. Which is equal to one US dollar.
2. There are also investor tokens. You can draw an analogy with traditional growth stocks in the markets. A token is bought at the start, in the hope of its further growth. This type of tokens were very popular during the ICO 2017-2018.
3. The token can be used like a coin to pay for goods and services.
4. Utility tokens. Such tokens are like a kind of pass to the functionality of different platforms. They are created for the purpose of performing technical functions and they have no cost.
In the cryptocurrency industry, coins play a much more significant role than tokens. They have more perspectives and are completely independent and independent projects.
Tokens and coins are completely different things. They at least differ in the method of creation and scope. Tokens are made much easier – just take a ready-made template on one of the platforms. This will not work with coins, it will be necessary to develop a new platform or change the code of an existing one. In general, the differences between these two concepts are significant. Now you can tell about them to those who think that coins and tokens are one and the same.