eToro – deposits and withdrawals
10.05.2022
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More about tokens and coins
Cryptocurrency is a general term which refers to any digital currency developed through cryptography and supported by blockchain technology. The specific details about how the mining of cryptocurrency actually happen can be a little more complicated to explain here. With the knowledge that cryptocurrency is a digitally manufactured currency, it saves to go further and understand its variants in the market today.
People loosely used the term bitcoin as a general reference to any cryptocurrency. They may be excused for making this absurd generalization because after all, bitcoin was the first cryptocurrency to land in the market and has gotten wides [read use today. But be that as it may, it is important to know better about what other cryptocurrencies are as well as what types are available.
Difference between crypto coins and crypto tokens
As a starting point to mastering cryptocurrency coins and tokens, it is good to understand that all coins are considered tokens but all tokens are not coins. Just to avoid getting lost in the discussion, both coins and token are variants of cryptocurrency. The reasons for this simple rule of thumb is in the following explanation.
The main point of difference between crypto coins and crypto tokens is in their utility. In sense, there are quite a lot of things that a crypto coin can do that a token will not. no wonder in the rule of thumb above, it already appears that coins have a greater leverage that includes and goes beyond what tokens can do.
A fundamental differentiator between crypto coins and crypto tokens is the blockchain to which they are linked. As already explained, the building block and support system f any cryptocurrency is the blockchain technology. It is on this blockchain that transactions are registered and processed. While crypto coins have their own native blockchain, crypto coins use the blockchain of other coins. In essence, the tokens do not have their own native blockchain.
Cryptocurrency coins
Cryptocurrency coins is not your ordinary nickel, copper or zinc money. As you already may be aware, these cryptocurrencies coins are digital which means you can not touch and feel them yet they have immense value. One startling thing about cryptocurrency is that the coins are administered on a native blockchain. This means that the set blockchain keeps track of every transaction that occurs along it.
An example of how coins operate is that for a chain let’s say Ethereum, the transactions conducted along the it is accessible and encrypted. Only members of that network can access the blockchain.
The creation of crypto coins was to have a replica of traditional currency but this goal is yet to take shape. The coins can be mined and be made accessible to investors through a distributed ledger. There are various crypto coins in circulation today with Bitcoin (BTC) taking a lead.
Available Cryptocoins today
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Polkadot (DOT)
- Bitcoin Cash (BCH)
- Stellar (XLM)
- Dogecoin (DOGE)
- Binance Coin (BNB)
- Tether (USDT)
- Monero (XMR)
Cryptotokens
Cyrpto tokens are different from coins in that they do not have their own unique and native blockchain. This means that at any time, token rely on the blockchains of crypto coins. Today, there are many tokens that run their transactions on Ethereum.
The point of difference is that tokens use smart contracts to transact on the blockchains of the other coins. In this arrangement, it is understood and practical that just a single blockchain has the capability of hosting very many tokens. For instance, Ethereum blockchain alone hosts most of the tokens you may think of including Maker, BAT, and Tether.
Features and utility of crypto coins and crypto tokens
At the risk of overemphasis, crypto tokens depend on crypto coin blockchains to run their transactions. Again, crypto coins are crypto tokens but not vice versa. The two forms of cryptocurrency can do just as much and more usability continue to emerge as technology keeps evolving.
Its time to briefly know what differences and uses define crypto coins and crypto tokens . Let’s make it in a simple table that is a little more explanatory.
Crypto-coins |
Crypto tokens |
| Crypto-coins operate on b their own native blockchains | Crypto-tokens do not have their own blockchain
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| The already established blockchain keeps track of all transactions that involve its native crypto coin through and through. | Crypto-coins depend on operating on blockchains or crypto coins
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| Crypto-coins can be mined using highly complicated and technical computational procedures | When a token is spent, it physically moves from one place to another |
| Crypto-coins act as money. For instance, Bitcoin was created for the sole purpose of replacing traditional money. Although this goal is not yet achieved except in El Salvador where it is used as a currency alongside the US Dollar.
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| A transaction in crypto-coins do not lead to a physical movement of the coin. Instead, it’s only the account balances that change
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| Crypto-coins are essentially digital versions of money
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Tokens can stand for assets or deeds |
| Coins can be multifunctional ie can be used for several purposes compared to crypto tokens
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tokens take more forms than just granting users access to products and services
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| The use of coins is primarily as a payment method for services or goods on a blockchain
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Tokens are also being used as a means of representing products and items of the physical world
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As much as this list of differences between crypto coins and crypto tokens may not be as exhaustive, it serves well to provide an hint. Of course the details around these digital currencies may be long and intriguing but any extra knowledge puts you ahead of the curve.
When making a cryptocurrency investment choice, it would be a good idea to choose wisely. You must always consider whether it’s a crypto coin or crypto token you would be going for. Whichever choice you make, there are unique rewards and risks at play. It is therefore important to assess each investment individually for its better safe than sorry.
