In the cryptocurrency ecosystem, many investors tend not to understand the difference between coins and tokens. As a result, they mistake one for the other and often use the names interchangeably. However, the two are different from each other.
How do the two differ? Are there similarities? Find out in this article!
So, if you compare coins vs tokens, what are the similarities?
On a basic level, they serve the same purpose in terms of value. It means that they are valuable assets and can be used to signify wealth.
Another aspect is that they can be used as a mode of payment. Some financial institutions accept cryptocurrencies like tokens as a mode of payment. Coins are a traditional financial denomination.
What are the Differences?
A coin is a form of cryptocurrency that operates on a blockchain. Some of the examples of these coins are Bitcoin and Litecoin.
Contrary to coins, tokens do work on other crypto blockchains. Examples of tokens are Waves, Lisk and Stratis.
But what does operating on a blockchain mean? It means that traders can transact and exchange coins between themselves. For example, you can exchange bitcoins for Litecoins and vice versa. In addition, coins are intangible. You cannot exchange them physically.
On the other hand, tokens are tangible. They must be physically present for them to be exchanged. It is manually done.
However, direct transfers of coins between different networks are not possible. You can only process these transactions on an exchange medium to complete the process.
Cryptocurrency coins are only transacted on a digital platform. Its counterpart is transacted as property.
Though you can use coins to buy tokens, some are more valuable than coins. This is because coins signify what you can possess, while the latter signifies what you own.
Cryptocurrency coins are a new introduction in the blockchain ecosystem, whereas tokens have been in the industry for a longer period.
Unlike coins, tokens are easy to come up with because they don’t require any technical knowledge. Usually, coins are mined using complex algorithms.
How are coins used?
Here are some of their uses:
- Cryptocurrency coins have a monetary value, and they serve as a mode of exchange.
- Pay for goods and services.
- You can save them for future use.
How are tokens used?
Tokens are used to interrelate with platforms that are built on distinct blockchains. It provides an easier way of checking the identities of the owner.
You can compare fungible vs non fungible tokens and choose the favorable option.
Different types of tokens serve different purposes, including.
- Security or Asset tokens- Essential in securing your assets.
- Payment tokens- you can use them to pay for products and services.
- Equity tokens- represent assets in a company.
- Utility tokens- through it, you can access a good or service.
Conclusion
The difference between coins and tokens is not wide, although it might bring about confusion if given much attention. You can decide which one you want to use depending on what you want to buy. If you want to purchase a good, coins are appropriate for you. On the other hand, tokens are vital when dealing with services.