In the world of cryptocurrency, you might have come across “tokens” and “coins” on a regular basis, but do we know, how are they different from each other.
The digital coin is an asset, which is native to its own blockchain. Bitcoin, Litecoin, and Ethereum, for instance, exist on their own blockchain. The digital coins’ transactions can be made from one person to the other, where all coins exist as data on a giant database, which tracks all the transactions. Tokens are often known as digital coins, which are created on existing blockchains- the tokens that are built on the Ethereum platform are called ERC20 tokens.
Digital Coins are used as virtual money which can be used to transfer, as a store of value and unit of account. For instance, Bitcoin has no other uses apart from being used as a payment system and a store of value, and it can’t be staked to earn more of it. However, some digital coins like NEO, DASH, and Ether have more features rather than just money transfer and asset.
For tokens, just remember that the fees need to be paid for all the transactions in a blockchain, not just the creation of tokens. It's similar to how coin transaction needs fees for securing the network.
Tokens are created to be used with decentralized applications (dApps). When the developers create tokens, they decide on the number of units to be made, and where the new tokens will be sent. Mostly, they pay some of the native crypto for the blockchain they are creating the token for.
For example, Musicoin is such a crypto token that allows the users to access different features of the Musicoin platform. Similarly, Binance has its own Bnb Token, which provides the traders with 50% off if they are using that for trading. WePower (WPR) is a good example of a token that represents electricity. It allows the users to buy and sell electricity on the blockchain.
All the coins are enlisted by coinmarketcap like Bitcoin, Bitcoin Cash, Litecoin, etc., while the ERC20 tokens are examples of tokens. Tokens are used to interact with the dApps built on different blockchains like Civic. If you are going for a holiday and if Civic were a partner, they would sens a QR code for confirmation of the traveler. Using the app, you can directly send the details to the company from your mobile app directly. There are four types of tokens- security, utility, equity, and payment.
We have already discussed the critical point of difference between the two above.
Crypto tokens are virtual currencies that reside on their own blockchain, representing a utility or asset.
It is a digital asset that helps in the verification and transfer of assets securely.
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