This is the Difference between Coins and Tokens in Cryptocurrency

This is the Difference between Coins and Tokens in Cryptocurrency – This is the Difference between Coins and Tokens in Cryptocurrency

When first entering the world of cryptocurrencies, not a few people are confused by the many assets in it, including the existence of coins and tokens.

The difference between coins and tokens is not only in the name.

However, the function, origin, and benefits are also different.

What is the difference between coins and tokens?

Before proceeding to the discussion of coins and tokens, you must first understand what blockchain is.

Reporting from the YouTube account Tech In Asia, blockchain is a system that supports cryptocurrency transactions without having to go through third parties such as banks.

This system is managed directly by all users.

What is a coin ?

Coins are issued directly by blockchain protocol developers.

Therefore, coins are also called native crypto assets or natives on the blockchain network.

For example, Bitcoin (BTC) which operates on the Bitcoin blockchain network, and Ether (ETH) which operates on its blockchain network called Ethereum.

In one blockchain network, users can send coins to other users. Like Bitcoin sent to Bitcoin, Litecoin to Litecoin, and so on.

Even so, it does not support transfers between blockchain networks. For example, a user cannot sell 1 Bitcoin and buy 200 Litecoins from the Bitcoin blockchain network itself.

Meanwhile, the function of coins is like money in general. Coins are used to transfer money as well as store value or investments.

What are tokens ?

This is the Difference between Coins and Tokens in Cryptocurrency

Reporting from Business Insider, tokens are digital assets built on blockchain networks belonging to other parties.

Tokens are created by a project which are then used as payment in order to enjoy the services that the project provides.

Generally, tokens operate on the blockchain using the concept of smart contracts.

Reporting from Tech In Asia, a smart contract is the application of blockchain code with the aim of binding an agreement between several parties.

An example of a blockchain commonly used by tokens is Ethereum, which also uses a smart contract system.

Examples of tokens are Tether (USDT), USD Coin (USDC), DAI, UMA, and Basic Attention Token (BAT).

Despite operating on another party’s blockchain, tokens can develop into coins as projects develop their own blockchain and move their tokens to a new blockchain as coins.

Examples of token development into coins are Binance Coin (BNB), Tron (TRX), and Zilica (ZIL) which were previously on the Ethereum blockchain.

The token function is used as a medium of exchange when running a project service that provides tokens.

For example Musicoin, which is a token that allows users to access various features such as streaming music from the Musicoin platform.

The difference between coins and tokens in Cryptocurrency

Reporting from Bitcourier, some conclusions regarding the difference between coins and tokens are as follows.

  • Coins have a native blockchain, whereas tokens just “hit a ride”.
  • It is cheaper to create tokens than coins that have to build their own blockchain network.
  • Coins have characteristics like money, which can be used as a means of payment as well as an investment. While tokens, even though they have a market value, are technically not a currency.

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