New Delhi: The meteoric rise of cryptocurrency in the past two years has attracted many investors world. However, many people are not aware of the new terms related with this industry. Some even don’t know whether they are buying tokens or coins.
Cryptocurrency being a new industry involves a lot of new terms to refer to digital assets. Investors often use them interchangeably.
Many people think that crypto coins and tokens are the same. It should be kept in mind that these two are not same. According to industry experts, all coins are considered tokens but all tokens are not coins in the crypto industry at a fundamental level.
Let’s have a look into the matter.
A crypto coin usually is native to a blockchain and is used to trade currency and store value, whereas a token tends to use another coin’s blockchain.
For example, Ethereum, is a blockchain. Its native coin is Ether. However, many tokens such as BAT and Loopring operate on this blockchain.
Coins directly represent a proposed medium of exchange. On the other hand, tokens represent an asset. The tokens can be held for value, or traded, and staked to earn interest. Some examples of tokens are Uniswap, Chainlink, and Polygon.
Transactions of crypto coins are handled by blockchain, while tokens rely on smart contracts for trade.
When a token is spent, it moves from one place to another. For example, NFTs (no-fungible tokens) are one-of-a-kind items, so the change in ownership must be manually handled. A coin doesn’t have to be moved from one place to another. All transactions are recorded on blockchains.
A token represents what a person owns, while a coin denotes what they’re capable to own.
Everyone has used a token at least once in their life even if not in this form. For example, the title of your car is a token. When you sell the car, you transfer the value of the title to another individual. However, you can’t buy something else with that title.
According to experts, if an investor wants to buy a product, coins are best and if it’s a service then utility tokens can be used.