Difference Between Crypto Coins and Tokens

With so many technological advancements taking place across the world, it’s normal to get confused between terms. Two terms that many people get confused with are crypto coins and crypto tokens. The confusion is understandable as both of these elements are similar in many ways as they’re used for making payments and can be swapped. However, they also have major differences that can’t be ignored.

At some point, you might have thought they were the same thing. However, that’s not the case. If you’re not aware of the difference, then don’t worry. You’ll learn about the difference between a crypto coin and crypto token here. 

What is a Coin?

Cryptocurrency coins are easy to understand and learn about as they have distinct features for you to remember. Let’s have a look at what these are:

  • Transactions Recorded on Blockchain

Cryptocurrency or coins operate on their respective blockchains. Since there are a multitude of cryptocurrencies present, you’ll find each of them to have their own blockchain. For instance, if you have pay someone using Bitcoin, then the receipt goes directly to the Bitcoin blockchain and the data is stored there. 

No matter what the cryptocurrency or coin you use to make a transaction, the track of the transaction will be recorded in the relevant blockchain. 

  • Use as Money

Along with this, you should know that crypto coins were mainly created to be used as money. Therefore, they’re the alternate option to make payments. Businesses such as Amazon, Tesla, and many others accept the use of crypto coins for transactions. 

Bitcoin is perhaps one of the largely used coin for this, but you’ll find new entrants emerging in the market with promising features. Litecoin and NEO are two more common crypto coins that you’ll hear of today. 

  • Use of Mining Process

Crypto coins are earned using the mining process. This can take place through two methods, including the Proof of Work and Proof of Stake systems. These are two entirely different methods at play. The latter is a more modern method of mining coins and offers better energy consumption. 

Bitcoin uses the Proof of Work system as it helps them improve their earning better. However, the mining process isn’t the most convenient as there are many Bitcoins present that can be mined.

What is a Crypto Token?

Now, let’s talk about what a Token is. While they’re similar to coins, they don’t have the blockchain technology operation that coins do. Crypto coins and tokens come under the head of digital assets, but tokens are considered an entirely different class than coins. Why is this so? 

For starters, tokens are issued on top of other blockchains and these exist alongside other tokens that may have different projects. These tokens aren’t complex to create, unlike the coins. Almost anyone can create these using the help of codes or automated tools readily available in the market. 

  • Smart Contracts

Tokens are programmable as they’re run on software, such as Smart Contracts. These help in outlining the features and functions of a token and how these will work. Almost anyone can access these tokens or participate in the system and it doesn’t require any authentication. 

Not only this, but there’s no central control or authority present that would control the system. The Smart Contract defines the rules of how the token will run. Along with this, the system is transparent as it allows to be verified by all. 

  • Represent Physical Assets

Tokens, unlike coins, can be used to represent physical assets. For instance, tokens exist that represent art, real estate, and intangible assets. This can be done through the process of tokenization, where these tokens can hold value for your assets. 

All in all, crypto coins and crypto tokens are vastly different from one another. If you’re planning on trading or making transactions using either of them, it’s best to be clear about what each of them offers you.