Cryptocurrency Tokens and Coins, What’s the Difference?
Are you just interested and want to dive into the world of cryptocurrency? As a newbie, you must be confused by the many and varied crypto terms. Don’t worry, Litedex often discusses that in blog articles and on Instagram. You can see and read it there. As we know, cryptocurrencies are increasingly gaining popularity and are becoming a lot of conversation in cyberspace. Plus, in 2020 ago, NFT (Non-Fungible Tokens) started hype and made people interested in cryptocurrencies. Even recently, NFT was added as a new feature on Instagram and has been officially released.
Also read: Official NFT Feature Released on Instagram! See How to Use It
Among the crypto terms that you already know, do you understand crypto tokens and coins yet? Because even though crypto is on the rise, there are still many people who don’t understand these two things and think they are the same thing even though they are different. So what are tokens and coins and where is the difference? Come on, find out the answer in this article.
Understanding Crypto Tokens
A crypto token is a cryptocurrency digital asset whose blockchain network overlaps with another party’s blockchain. Most tokens are created on top of the Ethereum blockchain network. However, crypto tokens can be developed and transferred into new crypto coins. Tokens have a market value, but cannot be used as a means of payment or investment. However, tokens can be exchanged for assets, such as gold, property, and shares.
In generating tokens, developers must adhere to certain token creation standards in order for the tokens to be used on the main blockchain network. For example on Ethereum, developers usually rely on the ERC-20 standard so that their tokens are interoperable with other decentralized applications (DApps) on the Ethereum blockchain network. In addition, developers who want to create NFT can follow the ERC-271 standard.
A crypto token can be described as a store in which there are items to trade. It can represent points, coins, game items, certificates, and so on. Tokens are referred to as crypto assets or crypto equity because many tokens are used to raise funds in the crowd sale. Once issued on a cryptocurrency exchange, crypto tokens can be traded.
Token Use
Crypto tokens have several uses based on their types. Here are the four types of crypto tokens and their uses:
Utility Token
Utility tokens or utility tokens can be used as a means for users to obtain products or services on the platform. In addition, utility tokens can also be used as a means of payment or for crowdfunding purposes.
Security Token
This token is a token whose value is pegged to certain securities assets, such as stocks, gold, bonds, and others.
Non-Fungible Token
NFT is a token that represents assets in the form of digital works that are unique and each work has only one.
Stablecoins
Stablecoins are crypto assets that offer price stability backed by reserve assets. This token is widely used because of its instant processing and security of crypto payment privacy with stable fiat money prices.
Token Example
Tether (USDT)
The USDT (United States Dollar Tether) token is a currency created as an intermediary between traditional currencies and cryptocurrencies. The value of this token is based on US Dollars, where 1 USDT is equivalent to 1 USD.
USDT was created to peg the market value of crypto assets against fiat currencies to reduce volatility. USDT is very suitable for beginners, because the price movement is relatively more stable. In addition, it is also easier to use to make transfers from crypto assets to US Dollars in a short time.
USD Coin (USDC)
USDC is a stablecoin whose value is pegged to the US Dollar on a 1:1 basis. USDC can be used for payments in crypto assets and provides a safe haven for traders in times of volatility.
Shiba Inu (SHIB)
Shiba Inu is a token that is traded under the SHIB symbol. This token was created in 2020 by a person or group of people with the anonymous name “Ryoshi”. This token meme quickly became popular even though it was relatively new because the investor community was attracted by the funny charm of this token.
Chainlink (LINK)
This token was created in 2017 and acts as a payment tool to help run nodes in Chainlink smart contracts.
Litedex (LDX)
The Litedex token is a token that stands on the Binance Smart Chain (BSC) blockchain network. This token was created to build a centralized ecosystem and a decentralized exchange.
What Are Coins?
Coins are cryptocurrency assets that have their own blockchain network and are often called native blockchains because they are issued by blockchain protocol developers. Coin Serves to transfer assets or investments. This crypto asset was created with encryption techniques so that it can be stored for a long time.
Just like money, coins can be shared, received, exchanged, last long, and have a limited supply. In fact, many opinions state that cryptocurrencies can replace conventional money in the future.
The coin has the characteristic of being tied to a public-open blockchain network. That way, anyone is allowed to join and participate in the network.
Examples of Cryptocurrency Coins
Until now, there have been many cryptocurrency coins circulating in the market. Here are some examples:
Bitcoin (BTC)
Who doesn’t know Bitcoin? Even people who are new to crypto must at least have heard of the world’s first crypto coin. The anonymous coin created by Satoshi Nakamoto, which was introduced in January 2009, aims to solve the problems that occur in the conventional financial industry. Then in 2011 Bitcoin became popular and furthermore, it has always been the leading crypto asset.
Ethereum (ETH)
Ethereum is a coin created by Vitalik Buterin in 2015 and is the most popular coin after Bitcoin. Besides being known as a crypto asset, Ethereum is also used in developing decentralized applications (DApps) and is a pioneer in smart contract technology. For those of you who don’t know what a smart contract is, you can read it first in the Smart Contract article: Get to know the types, how they work, and their implementation.
Binance Coin (BNB)
BNB was originally created as a utility token through the Initial Offering Coin (ICO) mechanism and has now become the native currency of the Binance blockchain. This coin was created in 2017 by Binance which is a crypto asset exchange platform. Binance Coin can be used to pay transaction fees in the Binance ecosystem, such as Binance.com, Binance DEX, and Binance Chain. In addition, BNB can also be used for payments, for example paying for online services, travel accommodation, virtual gifts, card packages, and lotteries.
Cardano (ADA)
This coin was created in 2017 and is designed to ensure the owner can participate in the operation of the network. Cardano uses Proof-of-Stake (PoS) consensus so that there is no mining but staking in transaction validation.
Difference between Tokens and Coins
As stated earlier, tokens and coins are two different things that are often considered the same. But you shouldn’t think so, here is the difference between tokens and coins:
Blockchain system
Tokens are created on top of another party’s blockchain network, while coins are created on top of the main blockchain network.
Utility
Coins are used for payment instruments like money in general, whether it’s for the purchase of goods or services. Meanwhile, tokens have more varied uses according to their types.
Transaction fee
Since tokens are built on top of other blockchains, there are generally additional costs involved in making transactions. When transacting coins, there is no transaction fee, but you are required to pay a gas fee as a compensation fee for the mining process.
Spread
In coin distribution, a mining process is needed to validate each transaction. Meanwhile, tokens, to increase their distribution, require an Initial Coin Offering (ICO) process.
How about you, do you understand the difference between tokens and coins? Continue to follow our articles so that you understand more about crypto. Don’t forget to visit the Litedex website, Instagram, Twitter, YouTube, and TikTok to keep getting updated information from us!
