Crypto Coin vs Crypto Token

In this buzz, we will focus on distinguishing between crypto tokens and crypto coins. Understanding this will help you with a better understanding of the cryptocurrency industry.
A must-read for a beginner. (< 5 min. read)

1.Crypto Token

People are just becoming familiar with the use of digital currency, where individuals conduct transactions on secure databases distributed across multiple computers. The security of transacting through cryptocurrency is one reason that attracts people to use this form of digital money. 

However, the cryptocurrency market remains one of the most challenging to enter, especially for beginners. The industry contains many blockchain projects and coins that beginners are unfamiliar with despite hearing of the famous name Bitcoin. Notably, distinguishing between crypto tokens and crypto coins can help with a better understanding of the cryptocurrency industry.

2.Cryptocurrency

Defining cryptocurrency before classifying the two types of crypto can help provide an overview of the digital currency. Cryptocurrency describes a form of digital payment that can be used in exchange for services or goods. Cryptocurrencies work using blockchain technology. Blockchain technology refers to a decentralized digital system scattered across many computers, which records and manages transactions. According to nerdwallet.com, cryptocurrencies have a total value of $1.6 trillion as of February 2021. Bitcoin remains the most popular cryptocurrency, with a value of about $969.6 billion. (You can check here for additional info on other cryptocurrencies and their values). 

Some of the common cryptocurrencies are listed below. 

• Bitcoin
• Litecoin
• Chainlink
• XRP
• Bitcoin cash
• Cardano
• Tether
• Ethereum
• Polkadot
• Binance coin

Exploring the two types of cryptocurrencies, crypto tokens and crypto coin, is essential for understanding how the crypto market works. The question to ask, therefore, is: What is the difference between a crypto coin and a token?

3.Cryptocurrency Coin

A crypto coin refers to any cryptocurrency that has an independent blockchain. Bitcoin is an example of a crypto coin since it has a standalone blockchain. The developers of crypto coins usually bootstrap them from scratch. They typically create a broader network for a crypto coin to achieve specific goals. For instance, the creation and existence of Bitcoin are to ensure a medium of exchange with a fixed and secure monetary policy. Bitcoin users equally prefer this crypto coin because of its censor-resistance when it comes to the store of value. 

Ethereum is another example of a crypto coin. Like Bitcoin, it has an independent blockchain. Unlike Bitcoin, Ethereum does not focus on financial data. Instead, Ethereum emphasizes random program data covering various things, including social media and video games. One can use Ethereum to pay gas fees, and send, receive, or manage assets. 

Crypto coins that are anything other than Bitcoin are generally known as Altcoins. 

Usually, crypto coins obtain inspiration from other cryptocurrencies or past technologies. The creators of crypto coins often combine other cryptocurrencies or past technologies to develop a specific crypto coin project. Their objective is to create an innovative network that serves a specific purpose in the digital currency era.

4. Cryptocurrency token

A crypto token refers to a distinct outlay of wider smart contract platforms, which allow users to create, give, and maintain tokens. The major difference between a crypto token and a crypto coin is that the former has a dependent blockchain. Crypto tokens are derived from an existing blockchain, unlike crypto coins, which have a standalone blockchain. 

Crypto tokens usually operate as utility tokens in the cryptocurrency industry. They exist within the environment of an application, and they serve the purpose of paying fees or incentivizing particular conduct or behavior. For instance, Dai is a token that is a part of the MakerDAO decentralized application found on Ethereum. As such, individuals can use Dai to access borrowing or lending instruments on the MakerDAO platform. Tokens within a blockchain could also represent a particular number of coins in the blockchain. For example, 20 tokens could equal a single Bitcoin in the Bitcoin blockchain. 

Some crypto tokens include the following.

• Golem (GNT)
• Ox
• Dai
• Augur (REP)
• Maker (MKR)
• Komodo (KMD)

Tokens are specific to individual applications within the broader blockchain of a coin. For instance, Dai can be exchanged within a particular blockchain of a coin such as Ethereum. It implies that users can exchange different tokens within a specific blockchain like Ethereum. Conversely, coins can only be exchanged with each other via cryptocurrency exchanges because each coin is built on an independent blockchain. 

5. Blockchain token

A blockchain token is usually created through an initial coin offering (ICO), where people can sell, distribute, and circulate the tokens. An ICO is a funding process that uses tokens in a blockchain. Blockchain tokens serve as the units of transactions within a blockchain. 

Blockchain tokens outsource their blockchain, unlike coins. For that reason, their accounting systems are attached to an existing accounting system (a blockchain). It ensures that a sub-ledger is created within a blockchain. When a person conducts a token transaction in a blockchain such as Ethereum, a sub-ledger is created for this transaction.

6. Crypto token types

Each type of crypto token has unique features depending on its usage. The most common crypto token types are as follows.  

• Security tokens
• Utility tokens
• Platform tokens
• Governance tokens
• Transactional tokens

Security tokens serve as a representation of real-life securities on a blockchain. They serve the same purpose as real-life securities (such as bonds, notes, and debentures, among others), however, on a digital currency platform (blockchain). 

Utility tokens, unlike security tokens, are not created for investment purposes. Instead, utility tokens are created for specific uses within a blockchain. For instance, they can be integrated with a protocol within a given blockchain and utilized to access the services of the same protocol within the primary blockchain. 

Platform tokens use a blockchain infrastructure to provide decentralized applications used for different purposes. They benefit from the primary blockchain in the form of security and the capacity to support transactions. 

The governance of a blockchain ensures all stakeholders can debate, collaborate, and vote on the best way to manage a system. Governance tokens propel the voting systems in a blockchain because the stakeholders in the blockchain use the tokens to indicate support for the proposed changes. 

Transactional tokens are used for exchange purposes. During the in-blockchain transactions, transactional tokens serve the units of agreed upon account. Therefore, they can be exchanged for services and goods within a blockchain.

“Paper money are going away”

-Elon Musk

DISCLAIMER: We are a publisher that publishes impersonal views which are not adapted to any specific person, portfolio or need. You understand that no content published as part of the information provided herein constitutes a recommendation that any product, service, particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person. You further understand that none of the creators, providers or publishers of the information contained in this advertisement, or their affiliates, will advise you personally concerning the nature, potential, value or suitability of the product, service, any particular investment, security, portfolio of securities, transaction, investment strategy or other matter. The information herein is provided and should be considered only for general informational purposes only and should not be considered or relied upon as investment advice.  We are a publisher only, and is not a securities broker or dealer, nor is the Company an investment advisor. To the extent that any of the information published as part of this advertisement may be deemed to be investment advice, such information is general and impersonal and not tailored to the investment needs of any specific person.

There is no guarantee that you will profit from your trading activity and it is possible that you may lose all of, or if trading on margin more than, your investment. Some of the results shown may be based on simulated performance. SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, SUCH RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. Past performance is not necessarily indicative of future performance. This brief statement cannot disclose all the risks and other significant aspects of trading. You should carefully study trading and consider whether such activity is suitable for you in light of your circumstances and financial resources before you trade.Full Disclaimer Here