|Tokens vs Coins|
Tokens vs Coins – A Helpful Guide
In the world of cryptocurrencies, terms like tokens and coins are sometimes used interchangeably, although they mean different things. For an advanced crypto investor, you may be able to tell the difference between these two, although there are still some people who cannot differentiate between these two terms. In this article, we will discuss these two terms and the difference between them.
Also Read – How To Choose A Best Cryptocurrency Exchange
- What are Crypto Coins?
- What are crypto tokens?
- Differences Between Crypto Coins and Tokens
What are Crypto Coins?
Coins are used to indicate crypto currencies that are based on your individual blockchain. Some examples of currencies include Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), and Ripple (XRP). The blockchains these coins are based on are very different in that they employ different miners, have different sizes, different rules that guide them, and work differently from each other. These currencies are used as a store of value and are used to facilitate transactions and payments on the Internet. Their values are tied to the laws of supply and demand that expose them quite a bit to volatility.
What are crypto tokens?
Tokens are cryptocurrencies that are not built on their own blockchain. Rather, these assets share blockchain with coins. One of the most popular crypto tokens available in the crypto space today is the ERC-20 tokens on the Ethereum network due to its support for smart contracts. There are many tokens out there today and some of them include DAI, UMA, USD Coin (USDC), Tether (USDT), and Basic Attention Token (BAT). Like coins, tokens are also used as a means of payment and a store of value. There are different types of tokens including:
- 1. Security tokens that are backed by real world assets.
- 2. Asset tokens that are used to represent physical investments.
- 3. Stable Coin linked to the value of the fiat currency.
- 4. Non-fungible tokens that are used to represent unique items that can be real or virtual.
- 5. Payment tokens that are used to facilitate transactions of goods and services.
- 6. Utility tokens that are designed to provide holders with specific access to certain protocols.
Now that we have properly differentiated between coins and tokens, we will now discuss the differences between these two crypto assets in the next section.
Differences Between Crypto Coins and Tokens
Just like you can buy coins on platforms like Bitcoin Prime, you can also get tokens in a similar way. Some of the main differences between coins and tokens are:
• Coins are more difficult to create than tokens because it involves building a chain of blocks from scratch. Tokens are built on existing blockchains, so they are easier to create.
• Coins are used primarily to settle transactions and the value of chains, while tokens are used for various reasons. As we mentioned earlier, there are six different types of tokens that are used for various purposes.
• Tokens do not exist on their own blockchain, while coins exist on their individual blockchains. Therefore, tokens will not exist without coins. Once a token is created, it starts using the standard and rules of the blockchain it was created on.
• Coins are mainly distributed through mining, while tokens are obtained mainly through ICOs from token creators. The tokens are not mined and their performance is tied to the blockchain on which they were created.
These are the main differences between coins and tokens. If you had any trouble differentiating these two terms, we are sure you are up to date.
The crypto space is filled with many terms that can seem confusing and the like. It is always important to clarify the difference between these terms and the correct way to use them. If you are new to the world of crypto or have trouble understanding some terms, it is always best to do a thorough research.
DisclaimerThe information on this website is not intended to be financial, business, investment or other advice, and you should not consider the content of the website as such. crypto.onlinenews.live does not recommend that you buy, sell or hold any cryptocurrency.
Crypto Tokens vs Coins — What Are Differences Between Coins and Tokens