Difference Between Crypto Coins and Crypto Tokens

 

Are you aware of the difference between crypto coins and tokens?

Not Exactly. Don’t worry as we are here to explain to you how to tell a coin from a token.

The terms “coins” and “tokens” are often used interchangeably inside the crypto space, but in reality, they differ quite a lot. It is very easy to get confused between the two terms as both falls under the cryptocurrency umbrella term.

While coins and crypto tokens are very much the same to some extent from a common user’s standpoint, there are technical differences in how they are built. Knowing this difference will help you and many other crypto users to make better-informed decisions.

So let us get started!

Key Takeaways

Coins:

·         A crypto coin is a form of digital currency that is native to its blockchain and stores value and acts as a medium of exchange.

·         Proof of work (PoW) and proof of stake (PoS) are the only two methods through which coins can be mined.

·         Some common examples include Bitcoin (BTC), Ether (ETH), and Cardano (ADA).

Tokens:

·         Crypto tokens are built for decentralized projects for an existing blockchain.

·         Tokens are like assets that offer holders certain platform-specific features.

·         Tokens offer functions such as utility, security, and governance.

Token vs Coin: Let us understand the difference

While many people use the phrase “crypto coin”, “crypto token”, and “cryptocurrency” interchangeably, they are not the same thing. Let us take a look at some of the key significant differences between a coin and a token.

A crypto coin such as Bitcoin is a standalone digital currency that can be used as a medium of exchange that stores value. Crypto coins have their own blockchain to function and can be mined or acquired through purchase. Bitcoin and other crypto coins have their own independent value and are not dependent on any other platform.

On the other hand, a crypto token is a digital asset that does not have any blockchain of its own but is specifically created on top of an existing blockchain. For example, The ERC-20 tokens are the crypto token of the Ethereum blockchain. So in summary crypto coins are digital currencies that have their own blockchain and value, while crypto tokens are digital assets which are built on top of another blockchain that derives their value from the underlying assets.

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Ending thoughts

Understanding the difference between a coin and a token is very important for any cryptocurrency enthusiasts who are planning to take a deep dive into the crypto world. We hope that this in-depth description of coins and tokens should help you avoid any kind of confusion when it comes to crypto terms.

To sum it up, the way to tell if you are dealing with a crypto coin or token is to find out whether the cryptocurrency has its own blockchain or not. If the cryptocurrency has its own blockchain then it is a coin and if it is built on another existing blockchain then it is a token.

So till next time.

Happy trading.