Coins and tokens are two basic terms that you need to understand before diving into the world of crypto assets. Both exist and are cryptocurrency digital assets. However, they are two very different things in terms of products and purposes of use.
Well, if you are an individual who is just about to enter and invest in the crypto world, don’t misinterpret and create expectations for coins and tokens. So, what is the difference between tokens and coins?
In general, crypto coins work just like fiat currencies used daily in real life, such as EUR, USD, and so on. Certain projects usually issue crypto tokens.
However, the difference between the two is not limited to that. Check out the following review to learn more about the differences between tokens and coins in crypto assets.
Built on Different Blockchain Networks
What is meant by blockchain is a technology that is used as a digital data storage system connected to cryptography. Coins are digital assets built on their independent blockchain network. At the same time, tokens are digital assets built on other parties’ blockchain networks.
Coins are digital assets issued directly by the blockchain developer, so they are often referred to as native crypto assets. Meanwhile, tokens are created from multiple platforms on a specific blockchain.
Those who develop crypto tokens must also comply with certain standards and rules. This is so that the token can be used in the main blockchain system.
Here are some examples of popular crypto coins:
- Bitcoin (BTC)
- Ethereum (ETH)
- Binance Coin (BNB)
- Ripple (XRP)
Here are some examples of popular crypto tokens:
- USD Coin (USDC)
- USD Tether (USDT)
- Uniswap (UNI)
- Chainlink (LINK)
Also read: What is Blockchain, and How Does it Work?
The next difference between coins and tokens is in their use. The initial purpose of creating early generation crypto coins such as BTC as a means of payment, like money in general, both to purchase goods and services.
There are still not many countries or companies that accept and legalize buying and selling products using coins. Crypto coins are still seen as one of the investment assets and guardians of the blockchain system by crypto asset players.
The main use of crypto tokens is also as a transaction. However, not only, tokens have several other advantages in their use compared to coins, namely as follows.
- Securities tokens: representations of tangible assets that exist in the real world, such as bonds
- Non-fungible token (NFT): a unique and only one object representation in the world
- Utility tokens: a means of getting products or services on a platform
- Payment tokens: means of payment for goods and services
- Stablecoins: have value linked to fiat currency
Mining Process vs. ICO
One of the reasons crypto assets are considered a good form of investment is that they are very limited in number. Like precious metals, their availability on earth is limited. But the number of people interested in it is large (so there are only a few people who will only have it), and its value will continue to skyrocket.
The process for multiplying or distributing crypto coins is through mining, aka mining. The mining in question uses special computer equipment to solve the algorithm of the transactions carried out.
Meanwhile, the process for multiplying or distributing tokens is through an Initial Coin Offering (ICO). Interested investors will make some offers. Then the crypto company will launch the token product.
Additional Fee When Transaction
Since the coin is a digital asset created on the blockchain itself, transactions with crypto coins usually don’t incur additional fees. On the other hand, since the tokens in cryptocurrencies are built on top of other blockchains, there will generally be additional fees when making transactions using these digital assets.
Crypto and tokens are two types of digital assets that can be used for transactions. However, both have different characters and values. So, which one will you choose?
Written by Faris