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Coin vs Tokens: How Different Are They?

James King -

Cryptocurrencies, coins, and tokens – are they all the same? If not, what’s the difference between them? Read on to learn what coins and tokens are, what differences they have and how they are used.

What Is a Coin?

A coin is a type of cryptocurrency that runs on its own blockchain. All transactions with coins are performed within the same blockchain. Coins are defined by a specific protocol. They usually power a network that is designed with a specific purpose.

The Bitcoin network is powered by Bitcoin. Bitcoin exists as a store-of-value and exchange medium. The network has secured monetary policy.

Another coin is Ether which also runs on its own blockchain. The Ethereum network has its unique purposes that are distinctive from Bitcoin and other coins. It serves as a platform for creating Smart Contracts, DApps, DeFi. Instead of focusing on financial data, as the Bitcoin network did, the Ethereum network focuses on arbitrary program data. Anything from social networks to games is included there.

What about altcoins? The division is simple here. Bitcoin is a coin, all other coins are called altcoins.

How Are Coins Used?

Coins can be used for different purposes. If we classify the cases of coin applications, it might look like this:

  • Coins are used as a store of value: take Bitcoin, for example. It offers an alternative to perform transactions without using the conventional banking system. It eliminated the need for centralized parties and became a store of value.
  • Coins can be used as digital cash: take DCash as an example. It focuses on digital transactions by boosting their anonymity level.
  • Coins can be used for international remittances: here, XRP serves as the best example. It is designed to facilitate international transactions and make them cheaper.

What Is a Token?

A token is a type of cryptocurrency that runs on a coin’s blockchain. Take the Ethereum blockchain, for example. It is used to create projects that use Smart Contracts, or DApps. It has also introduced a number of standards for creating tokens, including the ERC-20 standard for fungible tokens. Any project that is run on the Ethereum blockchain can create and use ERC-20 tokens. These tokens can be exchanged on the blockchain, along with Ether.

How Are Tokens Used ?

As you can conclude from the previous paragraph, tokens are mostly used for specific purposes depending on a project. Here are some possible token applications:

  • Tokens can be used for Smart Contracts: Smart contracts are protocols that automate transactions when predetermined conditions are met.
  • Tokens can be integrated into Dapps: from social media platforms to computer games.
  • Tokens can contribute to supercomputer platforms such as Golem.
  • Tokens can be used to determine digital user identities.

Tokens are usually divided into utility tokens and security tokens.

Utility tokens are user tokens. They grant access to specific services within a platform. They are created by start-ups to create the interest and demand for tokens through an ICO (Initial Coin Offering).

Security tokens can be compared with shares of a company. The more expensive a company is, the more its security token costs. Such tokens offer a part of company ownership to token holders.

The most popular coins are for sure familiar to you. Here are just a couple of examples:

  • Bitcoin, the most popular and the most expensive coin, serves as a store of value.
  • Ethereum enables the creation of smart contracts, Dapps, DeFi and allows developers to create their projects on the Ethereum blockchain.
  • Ripple is aimed at changing the traditional banking system by enabling fast and cheap international transactions.
  • Litecoin is a hard fork of Bitcoin. The purposes of Litecoin are not different from those of the main coin.

The most popular tokens are:

  • Chainlink is developed to allow blockchains to interact with external data feeds, payment methods, and events.
  • Maker is a governance token on the MakerDAO network. MKR tokens are used for voting within the network.
  • Tether is a token whose value is pegged to USD. It aims to provide some stability in the crypto world.

All these coins and tokens, along with 340+ more, are available for instant swaps on LetsExchange.io. And that’s not the final number, so it’s worth staying tuned for our updates. You can also follow LetsExchange on Twitter, Facebook, Reddit, LinkedIn, Instagram, Telegram, Medium, and Steemit.