Since its inception, cryptocurrency has altered the way the world operates. Adoption is rapidly increasing as more people become aware of its benefits. However, despite the rise in popularity, most people still don’t understand the difference between a coin and a token. In this article, we’ll explain how they are similar and different.
Crypto coins and crypto tokens both utilize blockchain technology and are digital assets that can be used for transactions and as a store of value. The terms are often used interchangeably, but they are not the same thing.
The key difference is that crypto coins have their own blockchain and crypto tokens use another coin’s blockchain. Coins are actually created as part of the blockchain, whereas tokens are smart contracts designed to run on-top of existing blockchains.
For example, Ethereum is a blockchain, and its native coin is ETH. However, many tokens also operate on Ethereum, such as ChainLink, Shiba Inu, and LoopRing. This allows businesses and developers to create their own tokens without having to build a new blockchain and maintain it. It saves a lot of time and money and allows them to focus on creating the best applications and user experiences instead of reinventing the wheel.
Tokens are a vital part of the growing cryptocurrency and blockchain ecosystem. They can be used for dapps, games, to represent real-world items and even voting rights. Practically anything you can imagine can be tokenized.
Now you know the difference between coins and tokens. Both assets play important roles on the blockchain, and understanding their similarities and differences should help you gain a better understanding of how cryptocurrencies work.