- March 15, 2020
- Posted by: Lara Tlass
- Category: Blog
Understanding Cryptocurrency: Token vs Coin
There are 100s of different terminologies used in the crypto-sphere that could be overwhelming for both new and experienced investors alike, however, there are major distinctions that make the classification of “Coin” and “Token” simple to understand, keeping in mind all coins and tokens are regarded to as cryptocurrency.
What is a Crypto coin?
The term “coin” generally refers to any cryptocurrency that has its own standalone blockchain. They have similar characteristics as money; they are mutually interchangeable, acceptable, divisible and have a limited supply. Many crypto holders claim coins will replace conventional money in the future.
Coins are tied to the public blockchain, anyone is allowed to join and participate in the network, they also may be sent, received or mined. Coins are not meant to perform any functions other than acting as money or financial value.
One of the most popular coins is Bitcoin, launched in 2009 bitcoin represents the world’s first cryptocurrency and blockchain. Because of its open-source software, several projects launched completely new blockchains such as Ethereum.
What is a Token?
Tokens are digital assets which are built on top of an existing blockchain e.g. Ethereum Blockchain, they issued by the project, which can be used as a method of payment inside project’s ecosystem, performing similar functions with coins, but the main difference is that it also gives the holder the right to participate in the network. It may perform the functions of digital assets, represent a company’s share, investing in start-ups and can be utilized in a crowd-investment platform or even voting.
A good example of utilizing a Token would be iOWNX, a crowd-investing platform based on Ethereum blockchain technology launching next month will accept iOWN Token as a value to pledge in a campaign for equity in the listed businesses. There are several uses of Tokens in today’s world, covering almost every industry from energy, gaming to business contracts and invoicing.
What is the difference in creating Coins Vs Tokens?
Ultimately, creating a token is easier than creating a coin, as you don’t have to create a new code or modify already existing one, the process of building an entirely new blockchain and launching a coin is typically considered to be extremely complex and takes a very long time. Whereas someone can use a standard template from platforms like Ethereum or NEO, that are blockchain-based and allow anyone to create tokens in just a few steps.
To summarize: Coin operates independently and run on their own blockchain networks such as Bitcoin, Ethereum or NEO, while tokens like iOWN, Tether and OmiseGO have a specific use in the project’s ecosystem, may present a company’s share, give access to product or service, perform many other functions and are built upon existing blockchain networks. Both Tokens and coins can be listed and traded on exchanges, so if you are looking to invest in either, it is recommended that you do your own research and learn more about the coin or token you are investing in.