What are the differences between crypto coin and token? It is not a herculean task to understand the difference between crypto coins and tokens, two terms that are often used interchangeably in the crypto ecosystem.
Yes, these two terms are quite confusing especially to those people who are new to this ecosystem.
Some use the term ‘coins’ to refer to that which is often termed as a ‘token’ by others and vice versa.
There are even a few people who use either of these two terms to refer to all of the digital assets that are available on the market as of now, signifying their limited or no knowledge about the differences between them.
These two terms however represent two different concepts with respect to the cryptocurrency ecosystem.
Though it is not a crime to use these two terms interchangeably, it is good to have a fair bit of knowledge about the differences between the two.
This article will clear the confusion regarding the two terms and by the end of it you will be able to use them knowing the true meaning of each and make out whether a digital asset is a coin or a token.
This knowledge will help you in the future if you want to learn more about cryptocurrency and blockchain. Check out Best Ways to Pursue Crypto Investment.
9 Differences Between Crypto Coin and Token
The crypto world and the participants in it use too many words and jargons often interchangeably that confuses other users.
Two of the most commonly used terms that are used interchangeably are ‘crypto coin’ and ‘crypto token.’
Yes, both these terms signify the digital assets but the most significant difference between the two is that crypto coins have their own distinct blockchain whereas the crypto tokens are typically built on an existing blockchain of some other platform.
For your knowledge, here are some of the more significant differences between the two terms which when known will help you to talk about the digital assets in a more confident and a much better way.
According to the definition, a crypto coin is a virtual currency that is native to its own blockchain.
The cryptocurrency tokens, on the other hand, can also be used as a form of payment but its main use is within the wider ecosystem of the platform of the blockchain.
The crypto coins can be used as a method of payment by making transactions within its own blockchain.
This blockchain is the distinct and decentralized ledger where these coins exist as a unit of value.
The crypto tokens however, are often created and used for innovation within the community of a network and promote user interaction by dishing them out as a reward or an incentive for participation in a blockchain platform or use of coin.
3. Use Cases
The crypto coins can be used as a reliable store of value being decentralized in nature. Also, it can be used as safe and secure digital cash due to its ability to permit making anonymous transactions.
These crypto coins can also be used for making international remittances quickly as it does not require any clearance or any approval from the counterparty.
The crypto tokens, on the other hand, can be used as smart contracts that allow making automated transactions by the users, such as the dApps, and as a supercomputer platform.
Moreover, crypto tokens can also be used as a means for digital user identity to verify access to age-restricted websites, software, and other digital services.
When it comes to creating a crypto coin you will need to know a bit of programming so that you can write a full code that can be easily validated.
In fact, you will need to create an entire new blockchain that is unique for the coin. This means that a crypto coin cannot be created by anyone since it needs some technical skills and knowledge, unlike creating crypto tokens.
While, on the other hand, when you want to create a crypto token, you do not have to go through all of these hassles.
You simply create a token which can run on any or a specific blockchain that already exists. For example, the ERC 20 token that is created on the Ethereum blockchain.
5. Market Value
When you consider the market value of a crypto coin and a crypto token, well, both will have a significant amount of it.
However, the market value of a crypto coin will be much higher and more significant in comparison to the market value of a crypto token.
The crypto coins serve the primary purpose, in its specific and non-changeable forms, of buying and selling of them on a crypto exchange as well as for making payments for purchasing specific goods and services as of now.
The crypto coins can also be used to buy in-game items and invest for a long or a short term.
A crypto token, on the other hand, serves a lot more purposes in its different forms. These include security tokens, governance tokens, utility tokens, and asset-backed tokens, Non-Fungible Tokens or NFTs to create collectibles, and as tokenized money or stable coins that denote the digital versions of a fiat money.
7. The Cost Factor
If you consider the cost, it is far too less expensive to create a crypto token due to the fact that you can create these coins based on an existing blockchain and not need to create an entirely new one for it.
On the other hand, creating crypto coins not only needs specialized skills in programming but is also quite an expensive affair because you will need a separate blockchain developed for it.
It is easy to migrate a crypto token from one blockchain to another when the developer needs it simply by creating its own new blockchain.
For example, Binance Coin or BNB, Zilliqa or ZIL, and Tron or TRX have all successfully migrated from tokens on the Ethereum blockchain to distinct coins.
As for the crypto coins that cannot be said because it has its unique blockchain. In extreme cases, crypto coins can be burned, which means putting them out of circulation forever.
9. The Benefits
Since creating a crypto token does not need creating a separate blockchain, it saves a lot of time and resources as compared to creating a crypto coin.
The developers while creating crypto tokens do not need to focus too much on the security aspects as compared to the crypto coins because these tokens utilize the security features of an existing blockchain.
Most importantly, a crypto token does not need to find miners for verifying their transactions as a crypto coin would.
This means that a crypto token does not need a strong blockchain as the crypto coins which are also vulnerable to attacks by hackers and other fraudulent actors that exist in this space.
Which is Better Between Crypto Coin and Token?
Since there is no specific set of factors that can distinguish between the two, you should consider a few basic features of them in order to decide which among a crypto coin and a crypto token is better for you.
If you want something that can be represented as a digital asset and have utility, then a crypto token is the best option to invest in.
However, do also keep in mind that a crypto token cannot be treated as money. This means that the crypto tokens are a much better option as compared to crypto coins if you consider it from only an investment point of view.
There are a few good reasons for it. One of the most significant reasons is that the crypto tokens are usually supported by specific applications that are specifically designed to carry out precise tasks.
Apart from that, the crypto tokens also have an explicit purpose to serve and will seldom go out of demand. However, for that the application needs to have precise real-world uses.
On the other hand, when you consider the crypto coins, you can only use them as money to transfer funds to someone residing in another part of the world or to make a payment to a merchant that accepts crypto coins for goods and services sold.
You can perform both these activities by using only one specific type of crypto coin such as Bitcoin.
On the other hand, it may not be possible with a specific type of crypto token.
This implies that you will not need all of the available crypto coins, old or new, for your specific purpose. This signifies that the demand for a specific crypto coin will not rise as it may for a particular crypto token.
In that sense, a crypto token can be considered to be somewhat better in comparison to a crypto coin, especially from an investment perspective.
Well, it all depends on your preference and need as to which among crypto tokens and crypto coins would you use.
Now, knowing the differences between the two terms, you can easily make out whether your favorite digital asset is a crypto coin or a token. You now do not have to refer to them as crypto assets not knowing whether it is a coin or a token.