The development of the blockchain in 2008 was an achievement that still reverberates to this very day. Businesses and industries across the globe came to realize the many benefits that came with decentralized digital currencies, rushing to absorb them into their day-to-day operations. Anyone who has ever dabbled in crypto trade has, without a doubt, come by the terms ‘Coin’ and ‘Token’ at least once.
It is clear that there are no limits when it comes to the world of blockchain-based currency systems. However, the general terminology is seen to be a potential problem in the industry, particularly for newbies, who might end up confused simply because they would be looking for the wrong words. There are literally thousands of digital assets on the internet, and this short but precise guide on ‘Token vs Coin’ is specifically designed to help you navigate the virtual landscape with much more ease.
What is Token?
As much as they may be referred to as digital coins, tokens are something different altogether. They are digital, that much is true. However, they cannot be classified as coins, simply because they do not run on their own blockchain networks. Instead, they are created off of other pre-existing blockchains, to be used wherever they are intended to be.
This is seen at particularly high rates on the Ethereum network, where the developers of the blockchain incorporate smart contracts that act as sort of an interface between the actual Ether coin and the sub-chain tokens. This is not the only location where tokens are available. They can also be found on the NEO blockchain.
Those on the ETH network are referred to as ERC-20 tokens, while NEP-5 is the name used for NEO tokens. Even Bitcoin tokens are available, the most famous one being the $Satoshi. So basically, any developer with the know-how can create their own token over an appropriate blockchain.
What is Coin?
A coin is best described as a digital asset that operates under its own designated blockchain network. Algorithm-wise, these coins exist completely on a virtual landscape, with no physical representation whatsoever.
So when you initiate a transaction in which coins are said to be transferred, you will be, in fact, moving massive blocks of data through the nodes connected to the particular network. The entire network is sometimes referred to as a virtual space running on a global database sometimes comprising of millions of individual devices. So once again, each individual coin operates on its own blockchain networks, where specific examples include Bitcoin, NEO, and Ethereum.
What is the difference between coins and tokens?
The most notable difference in the comparison of tokens and coins is typical with regards to their respective procedures of creation, along with their ongoing uses. Coins are relatively less complicated to create, where the interested developer simply needs to purchase some actual coin with the blockchain of choice, then use that coin to acquire the necessary validation from the minors of that particular coin.
This creation must keep in mind the need for transactional fees, where all procedures done with that token must be paid for to the minors and those who secure the network at large. On the other hand, the creation of digital coins is much more complex, where the developer must first establish the blockchain network from which the coin will operate. By now, you should be well aware that creating a blockchain network is no easy task, regardless of the developer’s expertise.
The larger majority of tokens are seen to be used for trade-in decentralized applications, or DApps. This purpose influences their value caps, where they must also incorporate standard deductions made towards paying the minors of the network on which they run.
On the other hand, coins are much less restricted, where they are mostly used as digital substitutes of real-world money, to be placed in their appropriate wallets. They can be used to purchase shares to brands or to pay for everyday services over the internet.
The most prominent examples of coins are listed as follows:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Ethereum (ETH)
- Litecoin (LTC)
- Ripple (XRP)
- Monero (XMR)
- Stellar (XLM)
- Nem (XEM)
- Cardano (ADA)
- Neo (NEO)
- Dogecoin (DOGE)
The following are well-known examples of tokens:
- WePower (WPR)
- Satoshi (SAT)
- Binance Token (BNB)
- Musicoin (MUSIC)
Coins vs Tokens: Final Thoughts
On the issue of Coin vs Token, there are many key factors at play, where it is very clear that the two are in no way similar. Rather, it can be finalized that one is merely an adaptation of the other, created from an overall base.
Probably the only aspect in which they may coincide would be in the purchases, where both coins and tokens can be found in online crypto exchanges, the likes of Binance, Coinbase, and CEX.io, just to mention a few.
While on the topic of crypto coin vs token, we believe it is crucial we make it clear that either can be traded for another currency, even those of the fiat kind. However, tokens are specifically designed for DApps, so it might be wiser to use them there, where some even come with advantages if used as such.
Coins are the overall best if you are looking for long-term investments of relatively higher value. All in all, the development of blockchain technology is accredited for both innovations, showing great prospects for continued growth.