The difference between coin and token

Nowadays, very few people know the difference between coin and token. Many people are used to using the term token/currency or coin as if it were the same thing. However, they are not.

Developing a currency is much more complicated than you think. It is even necessary to create a blockchain of your own. However, creating a token is very simple, since it should only be incorporated into an existing blockchain.

It may be a bit difficult to understand at first. Nevertheless, after that, everything becomes easier.

What is a token?

To notice the difference between currency and token, first of all, you must know the concepts of both. A digital token, it is a fraction of a programming code made in a smart contract format that runs on a blockchain. This token will act depending on what is written in its programming code.

In addition, in its database, you can record how many people worldwide have an amount of it. 

Simply put, it is a digital object that has value in a specific context or community. That is, its materiality does not have a cost as such.

Types of tokens we should know

The biggest difference between crypto tokens is the main use of each one. There are tokens that fit in more than one category. There are four types of tokens:

The one that functions as a financial asset

It is known as a financial token with which you can buy or sell physical objects publicly, without the need to move them from one place to another. It is a medium of exchange.

To enter the category, the token must meet three basic aspects. These are: not being a monetary investment, not relying on the work of others, and not having profit expectations.

The utility tokens

It is the one used within the platforms. They are cryptocurrency tokens with which you can pay for consumption within a blockchain. It should be noted that if the demand for this token increases. Its price will also increase consequently.

The security tokens

A security token is an investment contract, like stocks and shares of traditional assets. People who buy it, do it with the expectation of earning real money, in the short or long term within a company. 

With this type of token, it is much easier to become a shareholder of various companies and startups.

Like the previous one, its value of it can grow in conjunction with demand.

The Non Fungible Tokens

A non-fungible token is a digital representation of something that is one-of-a-kind, it is unique. NFTs are digital assets, like collectibles, gaming, art, and more. They can be exchanged in the different blockchain platforms.

If you want to know more about them, read our post about how to create an NFT!

What is a cryptocurrency?

A cryptocurrency is a virtual currency that is created through special encryption technology in conjunction with cryptographic techniques. Thanks to this feature, counterfeiting a cryptocurrency is almost impossible.

It is relevant to know that each of the cryptocurrencies operates as decentralized systems within a blockchain specially designed for them.

Most important cryptocurrencies

The world of cryptocurrencies has been growing. Since the launch of Bitcoin and its growing popularity, many other projects have been incorporated into the pursuit of great results.

This has led to the number of cryptocurrencies in the world being impossible to count. However, some crypto coins have managed to stand out more than others, for example:

  • Bitcoins.
  • Ethereum.
  • Binance Coin.
  • Cardan.
  • Moon.
  • Dogecoin.
  • Polkadot.

And this, by so much to name a few of them.

Token vs currency: in summary

In short, there is a big and main difference between a token and a currency and that is its origin. While cryptocurrencies use their blockchain, tokens are implanted on top of an already created blockchain.

A cryptocurrency can be used as an encrypted digital currency that departs for money. Through it, the investor can acquire tangible goods. It can also be used as a means of booking and saving.

On the other hand, a token represents an alphanumeric string that aims to become a public or private key. That is to say that it can both represent a specific utility, how to become a digital asset with various purposes.

As with cryptocurrencies, tokens serve as a payment method. However, not in the real world, but within a specific program. For example online games, like in Elemental Raiders where you can also earn crypto playing games. Finally, tokens also serve to credit possessions or shares within a company, activate video game rewards and offer access to platform-specific services.