By Jasmine Anand:
As digital currencies have made their mark, their vocabulary, at times, can be baffling to users. A good way to approach the cryptoverse is to master its nuances, which otherwise can be a complicated and daunting task.
While most people use tokens and coins interchangeably, there technically is a difference between tokens and coins.
Hence, to have a better grasp of the crypto markets, let us understand the basic difference between tokens and coins.
Know about crypto coins
A crypto coin is a crypto asset that has its own blockchain. In fact, they are native to their own blockchain, i.e., these coins have their own blockchain.
The best-known example is the Bitcoin blockchain’s coin BTC. Similarly, the Ethereum blockchain has ETH, and the Litecoin blockchain uses LTC, etc.
It must be noted that crypto coins are primarily designed to store value and work as a medium of exchange, similar to the lines of fiat or traditional currencies. Further, crypto coins are minted either by making use of a Proof of Work (PoW) consensus mechanism or via a Proof of Stake (PoS) mechanism.
Crypto coins can be used as
What is a crypto token?
Crypto tokens, though quite similar to crypto coins, are designed using blockchain technology. However, the crypto tokens are not native to the blockchain.
For instance, the ERC20 token is any token that uses the Ethereum blockchain. In simpler terms, a blockchain can only have one native coin. On the other hand, it can have hundreds of tokens built on top of it. For example, while ETH is the cryptocurrency native to the Ethereum Blockchain, there are numerous different tokens that also utilise the Ethereum Blockchain. Crypto tokens built on top of Ethereum include MATIC, LINK, USDT, etc.
Interestingly, when one creates a token, one doesn't create a Blockchain and write the entire code and worry about how transactions would be validated; instead, one just creates a token and runs on someone else's Blockchain. Further, the token team can rely on the coin’s network to provide safety and stability for the network.
For one's ease of understanding, while coins are used for governance, transactional fees, and other related use cases, tokens can represent a myriad of real-world use cases, including gaming, stablecoins, NFTs, and other fees.
Further, unlike crypto coins, tokens aren’t mined; they are created and distributed by the project developer. Some of the renowned crypto tokens are Dai, ChainLink, Wrapped Bitcoin, Axie Infinity, Filecoin, and heaps more.
A few types of crypto tokens include
To sum up, the difference between a crypto coin and a crypto token isn't vast. As blockchain technology continues to grow, digital coins and tokens will continue to witness expansion. And, the question of buying crypto coins or crypto tokens depends largely upon the holder's goal.
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