You probably have heard about Coin and Token once by now, but as a crypto-outsider, anyone could wonder what is the difference between Coin and Token because they seem pretty similar.
Understanding the difference between Coin and Token will help you choose CryptoCurrency to invest smarter and more carefully. Everybody should consider these terms as the basic knowledge to join the CryptoCurrency field.
Therefore, conteNFT would like to explain some of the fundamental differences between tokens and coins.
What is COIN?
Coins refer to cryptocurrencies built on their independent blockchain network. The most famous example is Bitcoin (BTC), which is also the world’s largest cryptocurrency by market capitalization.
Bitcoin is powered by its native blockchain network. Similarly, Binance coin (BNB) and Ethereum (ETH) function on their respective blockchains. These blockchains may differ in their size, rules, miners, performance, etc.
How are digital coins used?
Digital coins are designed to serve the same purpose as physical coins: transfer of value. In the crypto ecosystem, digital coins enable the transfer of payments. Digital coins also store value directly linked to their demand and supply. Therefore, the value of digital coins is often volatile.
There are a few exceptions to this, though. For instance, Dash (DASH) ownership will allow the customer to vote on decisions proposed to the DASH network. In the case of Bitcoin, however, the only way to get more Bitcoin is to buy or mine them.
What is a token?
Tokens refer to cryptocurrencies that don’t have a blockchain network of their own. Instead, these cryptocurrencies are built on another blockchain. Users can create digital tokens using one of the many platforms in the DeFi (Decentralized Finance) ecosystem.
Ethereum is one of the most popular choices, thanks to its support for smart contracts. Most of the digital tokens found today are ERC-20 and BEP20 tokens since the Ethereum and Binance Smart Chain platform easily enables creating tokens on top of these blockchains.
Currently, thousands of tokens exist in the market. Tether (USDT), USD Coin (USDC), DAI, UMA, and Basic Attention Token (BAT) are some of the commonly-used digital tokens out there. These tokens may have powers other than value transfer.
How are digital tokens used?
Much like digital coins, tokens also enable the transfer of value. However, in most cases, a digital token does have some additional powers than being a medium of payment. Anyone can create digital tokens to fulfill specific functionalities.
For instance, a privacy-focused Brave browser uses the Basic Attention Token (BAT) to reward its users for browsing the web. Customers get paid in BAT when they view advertisements from publishers who have partnered with the Brave browser. Or in the case of CONT token — conteNFT’s native and utility token, it is used for various useful functions on its platform, such as trading NFTs, voting for system’s upgrade, donating function, and royalty function. Users can receive CONT tokens as donations or through royalty function every time their NFTs are resold.
Different types of digital tokens exist for various purposes:
- Security tokens work as proof of investment in real-world assets such as equities and fixed income. These are issued during Security Token Offering (STO).
- Utility tokens are designed to provide access to a particular service or product. For example, the CONT token can access the conteNFT’s royalty system.
- Asset tokens are digital tokens linked to real-world assets such as real estate, gold, etc. In this case, a token represents the real-world investment.
- Stablecoins are digital tokens that have a fixed value. These are often pegged against fiat currencies like USD or EUR.
- Non-fungible tokens represent unique items, which could be real or virtual. Items used within a game are an example of these tokens.
- Payment tokens are almost similar to digital coins since they enable a transfer of payment in return for goods and services.
Some services create payment tokens to get rid of intermediaries as well. In most cases, the customer would be rewarded for using these tokens over a traditional payment method. Compared to building a coin from scratch, creating a token through the Ethereum platform would take considerably less time.
Coin Vs Token— The core differences
To summarize, some of the key differences between a digital token and a digital coin are as follows:
- Digital coins are based on their native blockchain network, tokens are built on the existing blockchain.
- Digital coins can be used for processing payments, but tokens are suitable for multiple needs.
- Digital coins are more difficult to create than tokens that can be built based on the existing blockchain like Ethereum or Binance Smart Chain.
Approaching cryptocurrency markets is a tricky task, but understanding the basic difference between the various types of cryptocurrencies can help you manage risks and make better decisions in a volatile ecosystem.
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All guest authors’ opinions are their own. conteNFT does not endorse or adopt any such opinions, and we cannot guarantee any claims made in content written by guest authors.
This content is not financial advice and it is not a recommendation to buy or sell any cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with cryptocurrency involves significant risks. We strongly advise our readers to conduct their own independent research before engaging in any such activities.
conteNFT does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader’s location. It is the reader’s responsibility to know the applicable laws in his or her own country.
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