If you’ve been following cryptosphere, you’d probably know terms like coins, altcoins, tokens, cryptocurrencies etc. But did you even find time to learn the difference between coins & tokens? It’s quite natural that you might not pay attention to these details, or assume to be something that it actually isn’t. Most confused terms are coins & tokens.
Assumption or queries include are these terms related to each other? Do they mean the same? Are these terms synonyms of each other?
This guide discusses everything about coins & tokens that will help you take educated decision for your investments. Keep on reading.
I saw a lot of people assuming that cryptocurrency coins & tokens are the same. Also, a lot of people asking the difference between cryptocurrency coins & tokens. So unveil the difference, I went on to prepare this guide.
What is a cryptocurrency coin?
Simply put, a cryptocurrency coin is a digital asset that is independent of any platform. With the platform, I do not mean the blockchain. A platform is something bigger than just the blockchain and a cryptocurrency coin.
The coin can exist on any platform and blockchain, but not all blockchains are acceptable on a platform. For example, Bitcoin is a blockchain with Bitcoin as its cryptocurrency coin. On the other hand, Ethereum is a platform with Ether as its cryptocurrency coins, and it is also a platform for DAPPs. These DAPPs may make use of the native cryptocurrency coins & tokens from the other platforms.
There’s another angle that can help you understand the difference between the two. A coin is something that has come into existence by making a change in the original code. In other words, improving the already existing version.
Properties of cryptocurrency coins
- Fungible: Single unit is equivalent to another
- Divisible: A single unit is divisible into many smaller parts
- Acceptable: The coins are acceptable on various platforms and exchanges
- Limited Supply: The supply of these coins is capped and constant
- Uniform: Single unit is equal in value as the other
- Portable: One can carry it in a wallet and exchanges
- Durable: Doesn’t degrade and is usable number of times
Additionally, there are some cryptocurrencies like, Monero(XMR) that do not have Bitcoin’s code behind it. It has its own code from scratch. However, such cryptocurrency does fall under cryptocurrency coin category. Apart from having its own code, it has its own blockchain and also has above-mentioned properties.
If you pay close attention to over 1500 coins listed on coinmarketcap, you’d notice tags at the bottom of the information box of a particular crypto element. Look at the example below. You’d notice that Bitcoin has a tag of ‘coin’.
Considering the fact that cryptocurrency platforms have one single usecase of money, altcoins like Ethereum, Ripple, and Next have a debatable listing. As all these platforms do not have a sole purpose of serving as a cryptocurrency. All these platforms are more than just a blockchain with a cryptocurrency.
Apparently, understanding what is cryptocurrency token can help you understand the other side of the story.
What is Token? How are coins & Token different
Unlike Coins, tokens are not independent of blockchain platforms. They need blockchain platform to sound meaningful, both to the system and investors. Remember I mentioned that platforms like Ethereum, Ripple are not a single usecase platform?
They aren’t because those platforms make these tokens feel home. That is, tokens need such platforms to exist and operate. Tokens such as Omisego, golem, and augur are built on top such platforms.
Again let me give you an example from coinmarketcap.
If you visit the website, you’d see tokens tab. Click on it and you’ll see this table. Notice the ‘Platform’ column, in that table. The value against each of the tokens is the platform that hosts it. In most cases, it’s ethereum. But there are over 1500 cryptocurrency assets and Ethereum cannot handle it all, yet.
Tokens are generally needed for using DAAPs. For example, Golem project has tokens GNT hosted on Ethereum platform. These tokens are mandatory in order to use Golem DAPP, you’d need GNT tokens for sure.
So the major difference between coins & tokens is that Coins are standalone entities in the cryptosphere and tokens are not. Tokens are a secondary asset for a particular application on the blockchain platform. Furthermore, these tokens have marketcap, you can buy/sell tokens but are no way a cryptocurrency coin like Bitcoin Cash or Litecoin.
One more major difference between coins & tokens is that all coins are mineable, but most of the tokens aren’t.
You’d be confused about altcoin now? Aren’t you? If not, it’s good, you can skip the next section. But for those who are confused.
What is Altcoin?
Alternative cryptocurrency coins are aka altcoins or simply coins. So, Altcoins are simply coins that are an alternative to Bitcoin. A majority, if not all coins are variant(fork) of our beloved Bitcoin. Bitcoin being open-source gave birth to a lot and lots of altcoins. These new coins have new changes in underlying codes, therefore becoming a whole new coin altogether. With new features, these altcoins serve as a competition.
This change in parent code that results in new altcoin is called forking. There are three types of forking, hard fork, soft fork and accidental fork. I will be discussing about these in detail in upcoming posts.
Coins and tokens are a very important entity of cryptosphere. Each has a certain amount of impact on the market. On an overview level, the major difference between coins and tokens is the structure. Tokens need blockchain platforms to survive and coins do not. Coins are mineable and most tokens are not.
As far investment is concerned, I think coins are way more reliable and convenient in investing. Tokens, on the other hand, are not as reliable and well performing. First of all, tokens are not accepted by all platforms like coins are. Second of all, in spite of high market cap, they are less profitable. At least, for now, Tokens are not something I’d think of investing in for a long term.
Over to you. What do you think the future of tokens is? Will it be worth to invest in tokens? Do you have something to share that the crypto enthusiasts should know? Let me know in the comment section below.
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