Difference Between Crypto Coins and Crypto Tokens
Not Exactly. Don’t worry as we are here to explain to
you how to tell a coin from a token.
The terms “coins” and “tokens” are often used interchangeably
inside the crypto space, but in reality, they differ quite a lot. It is very
easy to get confused between the two terms as both falls under the
cryptocurrency umbrella term.
While coins and crypto tokens are very much the same to
some extent from a common user’s standpoint, there are technical differences in
how they are built. Knowing this difference will help you and many other crypto
users to make better-informed decisions.
So let us get started!
Key Takeaways
Coins:
·
A crypto coin is a form of
digital currency that is native to its blockchain and stores value and acts as
a medium of exchange.
·
Proof of work (PoW) and proof
of stake (PoS) are the only two methods through which coins can be mined.
·
Some common examples include
Bitcoin (BTC), Ether (ETH), and Cardano (ADA).
Tokens:
·
Crypto tokens are built for
decentralized projects for an existing blockchain.
·
Tokens are like assets that
offer holders certain platform-specific features.
·
Tokens offer functions such as
utility, security, and governance.
Token vs Coin: Let us
understand the difference
While many people use the phrase “crypto coin”, “crypto
token”, and “cryptocurrency” interchangeably, they are not the same thing. Let
us take a look at some of the key significant differences between a coin and a
token.
A crypto coin such as Bitcoin is a standalone digital
currency that can be used as a medium of exchange that stores value. Crypto
coins have their own blockchain to function and can be mined or acquired
through purchase. Bitcoin and other crypto coins have their own independent
value and are not dependent on any other platform.
On the other hand, a crypto token is a digital asset
that does not have any blockchain of its own but is specifically created on top
of an existing blockchain. For example, The ERC-20 tokens are the crypto token
of the Ethereum blockchain. So in summary crypto coins are digital currencies
that have their own blockchain and value, while crypto tokens are digital
assets which are built on top of another blockchain that derives their value
from the underlying assets.
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Ending thoughts
Understanding the difference between a coin and a token
is very important for any cryptocurrency enthusiasts who are planning to take a
deep dive into the crypto world. We hope that this in-depth description of
coins and tokens should help you avoid any kind of confusion when it comes to
crypto terms.
To sum it up, the way to tell if you are dealing with a
crypto coin or token is to find out whether the cryptocurrency has its own
blockchain or not. If the cryptocurrency has its own blockchain then it is a
coin and if it is built on another existing blockchain then it is a token.
So till next time.
Happy trading.
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