A lot of us have actually probably been utilizing the terms ‘token’ and ‘coin’ mutually without realizing that there are small but meaningful differences between them. It’s something we’re all fairly guilty of. But to get some clearness relating to the distinctions between Bitcoin and a token, we initially require to recognize the difference between a token and a conventional cryptocurrency overall.
While both of these terms are used to define a unit of blockchain value, they still refer to different categories of digital currencies. Let’s explore.
COINS
While a coin—Bitcoin, Litecoin, Dogecoin—operates on its own blockchain, a token lives on top of an existing blockchain infrastructure like Ethereum.
Coins (that are also often called altcoins or alternative cryptocurrency coins) are digital money, created using encryption techniques, that store value over time. Basically, it is the digital equivalent of money. Bitcoin is the most famous.
A blockchain is, at its simplest, a record of transactions made on and protected by a network. So while coins have their own independent transaction journals, tokens count on the underlying network’s modern technology to confirm and safeguard transactions and ownership. Generally, coins are utilized to transfer wealth.
Bitcoin is based on blockchain — a public and distributed digital ledger, where all transactions can be seen. Data is stored collectively and shared between participants of the blockchain network. Blockchain guarantees transparency and reduces fraud. There are coins based on Bitcoin’s original protocol, created by Satoshi Nakamoto and opened to the public (Litecoin, Namecoin), and coins that operate on a blockchain.
The main characteristics of coins are:
1) A coin is a cryptocurrency that has its own independent blockchain network.
2) they are tied to public-open blockchain — anyone is allowed to join and participate in the network;
3) they may be sent, received, or mined.
4) coins can be used anywhere.
Overall, coins have the same characteristics as money: they’re fungible, divisible, acceptable, portable, durable, and have a limited supply.
For example, the conversion from 1 BTC to INR is approximately 1453049 INR as of December 2020, and thus, the Bitcoin price in INR can be used to price various goods and services. Therefore, apart from monetary uses, Bitcoin does not have much use. It cannot be staked or used to gain access to a dApp.
Token
Tokens are digital properties, provided by a blockchain-based task, which can be used as a repayment method inside of its ecosystem, performing similar features with coins. Nonetheless, the main difference is that it likewise offers the holder a right to participate in the network.
While the main characteristic of a crypto coin is that it must have its own blockchain network, a crypto token is an opposite: it runs on another blockchain.
The most common examples of tokens use the Ethereum blockchain and are referred to as ERC-20 or ERC-677.
One popular token is Chainlink (LINK). Chainlink uses an ERC-677 token on the Ethereum network and helps provide real-world data to smart contracts on the blockchain. Chainlink’s digital asset token, LINK, is used to pay for services on the network by creating smart contracts that can interact with real-world events and information that exists off-blockchain.
Another popular Ethereum-based token is the stablecoin USD Coin (USDC). USDC uses ERC-20 to tokenize the US Dollar on the Ethereum blockchain.
While tokens can be used for an exchange of value like with LINK as well as USDC, they can additionally digitally represent non-currency assets traded on the blockchain like NFTs, which additionally generally run on the Ethereum network. Tokens can be made use of to digitally trade real-world assets like gold, real estate, or shares of a company.
Tokens, on the other hand, are created for different purposes altogether. These purposes can range from operating dApps, representing fractional ownership in a physical asset like real estate, voting rights when participating in governance, or even value-added services specific to brands (the WazirX token – WRX is a great example).
Conclusion
Tokens and coins are two words that are used commonly in the cryptocurrency space. Coins are just methods of payment while tokens may present a company’s share, give access to a product or service and perform many other functions. Coins are currencies that can be used for buying and selling things. You can buy a token with a coin, but not vice versa. Coin operates independently, while token has a specific use in the project’s ecosystem. Hopefully, you won’t be caught misusing these terms now that you’ve understood the difference between them. As always, happy investing!
Note:- “You can buy a token with a coin, but not a coin with a token.”
If You Still Confuse or Want Guide on Trading as well as Investing in cryptocurrency, Feel Free to: CONNECT WITH US:
Follow Telegram Channel for Free Signal Update:- https://t.me/cctrade1
Ask For More Details:- Telegram:- https://t.me/cctrade19
Website:- https://www.cryptotrade1.com
Email :- info.cryptotrade1@gmail.comFacebookTwitterEmailShare