There are many who think that token and coin both are the same things, even several crypto companies think so but it is not the case. There’re a few huge differences between both of them. Let us find it in detail here.
What’s Coin?
A coin is one type of asset native to its blockchain. Just think of Litecoin, Bitcoin, and Ether. All these coins generally exist on their blockchain. The transactions of coins are made from person to person. But, there are no physical coins that move while you send or receive them. All “coins” exist as the data on a big global database. The database (blockchain) keeps proper track of these transactions as well as is checked by computers across the world.
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How to Use Coins?
The coins are used in the same way as your real-life coin or money. You may think of the coins such as Bitcoin, Monero, Litecoin just like coins in the wallet and piggy bank. Most of the time, they do not serve another purpose other than being used as money. They are “cash only” coins that can be used:
- For transferring money (send and receive value while using it)
- Store of value (easy to save and swap later for useful things)
- Unit of account (price goods and services)
What’s a Token?
A token can be developed on the current blockchain. This uses various features of the underlying blockchain to create the new system. A token represents your asset and utility and can’t be treated as real money. Still, it has market value and is not as essential as a coin. Tokens are created and then launched by anybody, as they need very little technical skills and knowledge.
How are Tokens made?
Surprisingly it takes a bit of technical ability. I will not recommend this to the newbie, however, for somebody with programming knowledge, it will not take very long for you to think. It needs a developer for spending some native coins on the blockchain that the token is created over, though.
For instance, if a token is made on Ethereum, then the creator will have to spend a few Ethers to get the network’s miners and validate their token transaction or formation.
It is very important to know that you have to pay the fees for token transactions over the blockchain, not only the token creation. Thus, any app built on Ethereum should make use of Ether coins for transferring an application- or specific tokens from person to person or between an app and person.
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Coin vs. Token: Which One Is Better?
When it comes to determining the right kind of cryptocurrency that is right to create is on every project team. Coding the new blockchain will be simple with the availability of open-source code. Nevertheless, designing the new blockchain for breaking any past technical restrictions of other current blockchains needs lots of effort and time.
Tokens built on current blockchain networks will serve an important role in the cryptocurrency market. There’re a lot of projects that are listed very high in a market cap rank that don’t have their native blockchains. There are some options that make use of Ethereum’s blockchain for making some major technical development, specific integrations, and lots more.
So, the best benefit of creating the new coin (new blockchain) or new token (by using the current blockchain) is there will be very little reliance on someone else to make the regular technical enhancements.
Final Words
Thus, the difference between both the coin and token is not very vast for you to understand, but it will cause a major headache when overlooked frequently. One best way you can decide on which you must use is by paying close attention to what you are buying. Suppose it is the product, you will need coins. Suppose it is the service, there’re utility tokens that you may use.
In a way we spend our tokens is very much like cash. While paying cash, physically your money moves to somebody else’s. However, we mentioned that just coins can represent money, hence they do not move at all. Hope you now know what a coin and token is!