- Crypto users use coins and tokens as synonyms but are two different concepts.
- Coins represent and serve the purpose of digital money.
- Tokens create a completely different category of digital assets.
Coins, also popularly known as altcoins, are a digital form of money, which were created with the intention to be used as money. These coins are created by implementing encryption methods, and they carry a value over time. A few characteristics that define a coin include having a limited supply, being fungible, running on a publicly open blockchain, could be traded or mined, and being accepted. Coins could be broken down and used in chunks to pay for various goods and services.
Coins aren’t dependent on any centralized authority and work by staying decentralized. This allows coins to manage themselves, such as handling their supply, how to record transactions on their network, or even how secure they are from any form of attacks or vulnerabilities. Bitcoin is the best example of a coin and the coin that sets the characteristic qualities to be a coin. Other examples include Ripple, Namecoin, Monero, Litecoin, etc.
Taking Litecoin into consideration, it operates on its separate blockchain, however, it originated from the fork of the Bitcoin blockchain. Litecoin serves faster transaction speed, standing at 56 transactions per second, than Bitcoin, standing at 4.6 transactions per second, and is the major reason why it was ever brought into existence. Litecoin also serves as digital money, with 1 Litecoin holding an average fluctuating worth of $213. It also generates a new block for mining in intervals of 2.5 minutes and has a max supply cap of 84 million.
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Tokens are defined more like digital assets that represent physical assets but still, they have a value and could be traded if needed. Tokens could also be a payment method but the major part that separates it from coins are the rights to be a part of the network given to its owner.
Tokens are issued by the project and could be presented as shares of the company. At times, some tokens may even represent a piece of art. When a specific value is given to a token after creating it, the process is called tokenization. A real-world example of a token could be a flight ticket, a flight ticket could only be utilized at a fixed place at a fixed time. Similarly, tokens can be used at specific places or at specific times.
A token does not have its blockchain, it rather works on blockchains of other coins. Functions or use of tokens are defined by smart contracts which are the software protocols for tokens. Tokens are easy to create and anyone could do so, simply by using templates served by platforms like Ethereum. Some tokens that work on the Ethereum blockchain are Basic Attention Token, Tether, USD coin, etc.
BAT or Basic Attention Token runs on Ethereum blockchain and is an ERC-20 token which is also a currency on a popular browser called Brave. The main aim of BAT was to be traded among publishers, users, or even advertisers. BAT has a current value of $1.12 and a max supply cap of 1.5 billion.
You cannot buy a coin with tokens but you can buy tokens with coins. Coins could be considered just a payment method while tokens could be considered just assets that hold a value. Coins could be bought or sold while tokens could be bought and exchanged. If a good is to be bought, coins are the fair choice but if it’s a service, tokens are a more suitable choice, it completely depends on what you need to buy.
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