Cryptocurrency News

The Difference Between Coins and Tokens

By October 14, 2020 No Comments

In simple terms, a coin is a cryptocurrency that has its own blockchain. Coins are usually created for new purposes and they are inspired by innovative ideas.

In contrast, a token is a cryptocurrency that doesn`t have its own blockchain. Tokens exist on top of a blockchain that has another native coin. For example, MKR is a token on the Ethereum blockchain, which already has a native coin called ETH.

The most popular blockchain for issuing custom tokens is Ethereum. Most of them are created in compliance with ERC-20, which is a special standard in the Ethereum ecosystem.

The cryptocurrency space is very risky. Entering this volatile market requires knowledge and education. You have to know about different kinds of cryptocurrencies like coins and tokens. When you have deep knowledge about this space, you can trade or invest in a safer way and risks will be reduced to a great extent.

You have probably heard about Bitcoin, but there are many different altcoins and projects in the blockchain world. Blockchain is the technology behind bitcoin and many other cryptocurrencies. Generally, all cryptocurrencies that are not Bitcoin are referred to as “altcoins”. Ethereum, XRP, Litecoin, TRON, and EOS are among the top altcoins of the crypto space.

What is a coin?

A coin is a cryptocurrency that has an independent blockchain. Coins usually have a wide network and these networks are designed for special goals. ETH is an example of a coin. Ethereum is a smart contract platform that allows users to create a wide variety of blockchain-powered applications. Coins are often inspired by past technologies or other cryptocurrencies and combine them into a new network with unique capability. XRP, Litecoin, Dash, and Cardano are examples of coins.

What is a token?

Tokens are designed on top of existing blockchains like the Bitcoin blockchain or the Ethereum blockchain. A token can be created by anyone. All you need is a little bit of cryptocurrency, an existing blockchain, and some coding knowledge.

Tokens are normally designed for use in very specific applications. Bancor, PowerLedger, and Basic Attention Token are some examples of tokens.

Final thoughts

At the moment, most blockchain-based projects are using Ethereum to create their tokens. There are many ERC-20 tokens in the blockchain space these days. Creating an ERC-20 token has a lot of advantages for the project compared to other options. ERC-20 tokens can easily be integrated with other Ethereum-based apps, giving the tokens more potential to achieve high liquidity and utility. A cryptocurrency exchange is required for converting coins between each other, but tokens can often be swapped directly on the blockchain. Understanding the difference between coins is one of the key steps when you are getting started with the complex world of cryptocurrency and blockchain technology.