Coins and Tokens: What is the difference between them?
When you are interested in cryptocurrency, you inevitably encounter the technical things that are required for understanding, namely: blockchain, smart contract, encryption, etc.
Behind cryptocurrency is a huge technical base, and hence the understanding of sometimes difficult to explain things in simple words. Let’s take a shot and clarify what is the difference between a Coin and Token.
What is a Coin?
A Сoin is an underlying product of blockchain technology, e.g.: Bitcoin, XRP, Dash, Monero, etc. The blockchain is completely transparent, self-regulated and maintained due to consensus mechanisms, such as Proof-of-Work or Proof-of-Stake.
Basically, coins are just information on your balance on the blockchain. A coin represents a unit working as money that has some value. It is a payment method. Consider stable coins as an example.
What is a Token?
In fact, the name “Token” speaks for itself. This is not a Coin, it is just a conventional functionality unit created according to the existing blockchain standards, like ERC20. In other words, the company issues a contract on an external Blockchain (like Ethereum) that serves as fuel for in-platform operations.
Here are token types:
- Commodity tokens (Digix, El Petro). These tokens are backed by real-world commodities, whether it is gold, silver or oil. The rate of these tokens depends on the rate of commodity backing.
- Protocol tokens (Gnosis, Stellar). These are cryptographic pieces of code required for access to protocols that a certain service utilizes, like building DApps or Decentralized exchanges for Ethereum.
- Security tokens (Tezos, Polymath). These tokens act as a company’s share. Basically, with these tokens, you may own a part of the company, like in a stock market.
- Utility tokens (AWC, Golem). These tokens provide access to certain features of a service issuing ones. For example, AWC is a utility token of Atomic Wallet used for bounty campaigns and signups. You can hodl it to use for the wallet’s upcoming features or trade it on IDEX.
- Collectible tokens (Cryptokitties, RarePepe). These tokens represent a virtual collectible unit, like baseball cards, adorable kitties or memes. But on the blockchain.
What is the difference between Coins and Tokens?
The main and basic difference between Coins and Tokens is that the Coin acts as digital money with its own blockchain. Coins have their own infrastructure to sustain transactions.
Tokens, in turn, are a conditional unit based on the existing blockchains and used for functionality purposes. For example, the largest number of Tokens is created on the Ethereum Blockchain. All the token transactions take place on the Ethereum blockchain, with GAS as a network fee.
Sometimes, projects that based their tokens on the existing blockchain migrate to their own main net blockchain in order to have more options and control over their currency, as it happened to TRON. After migration, the token becomes separated and can be used as a payment unit for certain purposes.
Where to store/manage Coins and Tokens?
Indeed, there is a huge number of Coins and Tokens in a cryptocurrency world. Atomic Wallet supports most of the top Blockchains and any of Ethereum tokens you can add to.
Unlike centralized exchanges, Atomic is a decentralized wallet, all your private data are stored in an encrypted manner on the end-user device and never leave it, so your money is totally under your control.
We are happy to provide you with the most convenient way to hold and manage all of your cryptocurrency assets. Download the App now, and enjoy your cryptos being safely managed!