Difference Between Coin and Token

 

What is the difference between a Crypto coin and a Crypto token?

Major difference between coin and token, apart from the algorithm, is that a coin has money utility. Additionally, it can be used to back applications, and smart contracts, validate transactions or used for staking. Another notable difference between tokens and coins is what they represent. While crypto coins are essentially digital versions of money, tokens can stand for assets or deeds.

By now, the difference between coin and token should be quite clear. However, coins and tokens do not replace each other, but they serve different purposes. Each one of them is better in the appropriate context. The difference between the coin and token is not very vast but one must know that the two are not the same.

Tokens often get called digital coins. However, this isn’t correct. There is a major difference! Coins and tokens both represent a store of value, much like fiat currency, such as dollars, euros, yen, etc. But there’s a crucial difference: digital coins are a form of money, while digital tokens represent something that can be assigned a price.

The difference between token and coin isn't vast, but it can cause a major headache if frequently overlooked. One quick way to decide which one you should use is to pay attention to what you're buying. If it's a product, most often, you would need coins. If it's a service, there are usually utility tokens you can use.

Going by the differences between token vs coins, the following cryptocurrencies qualify as coins: A token represents what the beholder owns, while a coin represents what the beholder is capable of owning or can own. Tokens had a longer history even before cryptos came into existence. Words “coin” and “token” are often used as synonyms and considered by many people as interchangeable. But they refer to two completely different concepts. So why many crypto users confuse coins and tokens and what is the crucial difference between them?

There is a clear distinction between coins and tokens regarding the algorithm: Another difference between the two is their representation. A crypto coin is the digital version of underlying value, which might be debatable, whereas tokens carry the asset or deeds. Coins are just method of payment while tokens may present a company’s share, give access to product or service and perform many other functions. Coins are currencies that can be used for buying and selling things. You can buy a token with a coin, but not vice versa. Coin operates independently, while token has a specific use in the project’s ecosystem.

The main difference between these two comes down to utility. There are things you can do with tokens and not with coins. On the other hand, some marketplaces will accept coins and not tokens. Tokens and coins are subclasses of digital currencies, which can be owned, used and exchanged. But they only exist digitally in electronic form. While all cryptocurrencies are digital currencies, not all digital currencies are cryptocurrencies. The main difference between these two boils down to their utility.

To understand tokens, it’s helpful to realize they come in different flavours. Utility tokens, for example, blur the line between coins and tokens. They are created by businesses. They give the owner the right to use that company’s product or service in the future. You should now know the simple definition of both a coin and a token: coins are native to their own blockchain. Whilst tokens have been built on top of another blockchain, like Ethereum, NEO, or Waves.

The fact is that coin and token are very much alike on a fundamental level. They both represent value and can process payments. You can also swap coins for tokens and vice versa. – Simply put, a token represents what a person owns, while a coin denotes what they're capable to own. Additionally, everyone has used a token at least once in their life even if not in this form. For example, your car title is a token. When you sell the car, you transfer the value of the title to another person. However, you can't buy something else with that title.

Coins primarily serve as a payment cryptocurrency, while tokens on the other hand can serve a variety of use cases. For instance, have the following token classifications: We use the word crypto to cover a multitude of currencies, but in fact there’s a difference between coins and tokens. 

You can buy tokens with coins, but some tokens can carry more value than any of them. For example, a company's share. However, since there are usually restrictions to where you can spend a token, it doesn't have the liquidity a coin offers. Words “coin” and “token” are often used as synonyms and considered by many people as interchangeable. But they refer to two completely different concepts. So why many crypto users confuse coins and tokens and what is the crucial difference between them?

If you want to learn more, feel free to leave your valuable comments. We are happy to assist you. All the best for your future.

(All the material in this article are only the views of the author, and couldn’t be taken as “Financial Advice”)

Key Words: Difference between coin and token in crypto
Difference between coin and token in Blockchain