The cryptocurrency space has become an umbrella for different interpretations and understanding of the assets that fall under it. Crypto tokens and crypto coins have been viewed as the same entity by a lot of people. Are you also one of those people who thought crypto tokens are the same as the crypto coins? We’re here to break that misconception and understand the difference between crypto token and coin!
If you go for the basic definition, they both are digital assets that have been derived from a blockchain. Let’s find out how the difference between crypto token and coins shapes up, shall we?
Crypto Coins vs Crypto Tokens: What Are Crypto Coins?
Source / Crypto Coins
Crypto coins are digital assets that have been derived from a blockchain and primarily serve the purpose of a cryptocurrency. It is native to a blockchain that has been built from a pre-existing open source blockchain or even from scratch. Crypto coins have a blockchain of their own and serve as the payment medium primarily for their native blockchain. You might have heard about altcoins as well. They are standalone crypto coins as they have their own blockchains. Some of the most famous crypto coins are Bitcoin, Ethereum, Matic, Solana, BNB, and so on.
Features of Crypto Coins
When it comes to crypto coins vs. crypto tokens, the difference between them mainly lies in the features that they both have. The general features of crypto coins are:
Native Blockchain
Crypto coins have the primary feature of being derived from the native blockchain or even their forks. Cryptocurrencies that run on native blockchains or the forks are called crypto coins and serve different functions created through the protocol. The feature of having an independent blockchain provides multiple functions and technical solutions to the crypto coins. You must have seen BTC, BNB, ETH and other crypto coins being valued in the international market. That intrinsic value is initially decided on the basis of efficiency and the security provided to the crypto coins through the blockchain’s protocol.
Used as Methods of Payment
Crypto coins are synonymous to cryptocurrencies and thus serve the purpose of being used as a payment medium as well. They have the unique features of scarcity, durability, security, portability and above all, being stores of value. Crypto coins are already accepted by companies like Microsoft, Tesla, Starbucks, PayPal, and so on.
The Difference Between Crypto Token and Coin: What Are Crypto Tokens?
Source / Crypto tokens
Crypto tokens might play the same roles as crypto coins but that is something which happens under conditions set by the developers. In actual definition, crypto tokens are digital units of value which represent some other asset or entity. Unlike the crypto coins, crypto tokens do not have their own blockchain. They are issued in a limited quantity over existing networks. The conditions set for issuing the tokens decide their quantity.
They can be used to serve a multitude of purposes, like raising funds, promoting charity, represent other cryptocurrencies being wrapped tokens, or even more as thought of by the developers. Some of the famous crypto tokens in the crypto space are Tether, USD Coin, LEO Token, Shiba Inu, and many more.
How Are Crypto Tokens Built?
Crypto tokens are built on pre-existing blockchains and that is one of the main differences between crypto token and coin. They represent an entity or asset and anyone can use special ready made solutions to generate tokens. These solutions do not require any kind of coding skills and can be done by anyone. However, developers do still make use of smart contracts to make advanced tokens with special features. So, building crypto tokens is not particularly tough. Anyone can even copy the source codes from deposits like Github.
What Are The Types of Crypto Tokens?
Based on the purpose that they serve and the method of development, crypto tokens are classified into four different categories.
Security Tokens
Different firms release securities for multiple asset classes. The crypto tokens that are digital tokenized forms of traditional securities are called security tokens. Notably, owning security tokens does not give the owners any rights to the entity over which the token has been released. These tokens are issued over public offerings which are called security token offerings.
Equity Tokens
You can consider equity tokens to be the subset of security tokens. Just how equities are issued, equity tokens function like traditional stocks and provide ownership rights to the token holders. These tokens provide a share of the entity’s profits to the holders and even the right to be a part of the major decisions of the company.
Utility Tokens
These are the most famous form of crypto tokens in the decentralized internet. These tokens provide access to the specific applications or services on various blockchains. Such tokens are issued using initial coin offerings and offer rewards, discounts and various benefits to the token holders.
Payment Tokens
These are different from utility tokens and are specifically to be used for the purpose of payments. These tokens may resemble crypto coins at times and often create confusion between the two. The difference between crypto coins and crypto tokens is that these tokens do not interact with any kind of blockchain based applications.
Concluding the Difference Between Crypto Token and Coin
We do hope this post has helped you understand the difference between crypto token and coin. Crypto coins are counted as cryptocurrencies and traded at the exchange platforms. On the other hand, crypto tokens are used as a representation to some other assets. There are standards like ERC-721, ERC-20, and ERC-1155 which provide the framework on which the tokens are built and issued.
