Difference Between Coin and Token | What is a Crypto Token? | Types of Crypto Tokens | What Are Tokens Used For? | What is a Crypto Coin? | Popular Crypto Coins | What are Coins Used For?
When it comes to discussing cryptocurrency, even some of the most experienced of us in the space still get confused when referring to a token vs coin.
For most people, the two terms seem to be interchangeable and although the mistake is understood in context, we want you to be the most knowledgeable as you engage in conversations about the world of cryptocurrency.
Before we dive in with detail, here are three short points to remember:
- Crypto coins are the native currency of a specific blockchain (Bitcoin, Ethereum, etc.)
- Crypto tokens are built on existing blockchains (USDC, DAI, etc.)
- Crypto coins are primarily used as digital money, while crypto tokens are used in numerous ways.
What is the Difference Between Coin and Token
Let’s break down each of these individually in order to best understand both coins and tokens.
The primary distinction boils down to functionality and creation. Coins are general-purpose digital currencies, operating independently on their own blockchains.
They’re the big players in terms of facilitating transactions and acting as value stores.
Tokens, on the other hand, are the utility players, offering a broader range of functions and applications, all while riding on the infrastructure of existing blockchains.
Another key difference is in their creation.
Minting a new coin requires building a new blockchain from scratch—a complex, resource-intensive process.
Creating a token is more accessible, thanks to platforms like Ethereum, which allow developers to launch new tokens through smart contracts with relative ease.
What is a Crypto Token?
While coins are often viewed as the backbone of the cryptocurrency industry, tokens bring a diverse and dynamic layer to the digital economy.
These versatile tokens play a plethora of roles, adapting to various needs and functions within the vast crypto ecosystem. Their flexibility and utility make them an essential part of the blockchain landscape.
Tokens and Existing Blockchains
Unlike coins, which operate on their own blockchain serving primarily as currency, tokens are developed on top of existing blockchain infrastructures.
The Ethereum blockchain for example, renowned for its revolutionary smart contract functionality and ease of use for developers, is one of the most favored platforms for token creation.
Smart contracts automate transactions and agreements, ensuring they’re executed only when predefined conditions are met, without the need for intermediaries.
This capability has made Ethereum a popular choice for developing tokens, though it’s far from the only option.
Many other blockchains, such as Binance Smart Chain, Polkadot, and Solana, also offer robust environments for token creation, each with their unique features and advantages.
Broad Use Cases
As some say, tokens are indeed the chameleons of the crypto world, capable of representing a wide array of assets and rights.
Their adaptability allows them to embody anything from tangible assets like real estate and art to intangible services, privileges, and even other currencies.
This versatility opens up endless possibilities for innovation and application in the digital realm.
Types of Crypto Tokens
Among the thousands of crypto tokens currently available on the market, there are seven main types, which we have listed below.
- Payment Tokens: The most well-known type of token used to complete transactions wherever the specific cryptocurrency token is accepted.
- Security Tokens: Tokens that are backed by an underlying security, such as real estate.
- Utility Tokens: Crypto tokens that have a specific use case within a blockchain or crypto ecosystem.
- Governance Tokens: Tokens that enable users to participate in the governance of a blockchain.
- Basic Attention Tokens: Using basic attention tokens, users can be paid for their attention, such as for digital advertising.
- Gaming Tokens: Investors can own coins that have both in-game value and are traded on third-party exchanges.
- Non-fungible Tokens: Investors can own digital tokens that signify ownership of a specific asset.
What Are Tokens Used For?
As we delve deeper into the token vs coin discussion, keep in mind that tokens essentially extend the utility of blockchain technology far beyond simple transactions.
They enable the creation of complex, decentralized applications that can disrupt traditional industries, from finance and real estate to art and entertainment.
By leveraging the properties of blockchain — transparency, security, and immutability — tokens can represent ownership and rights in a way that’s both verifiable and efficient.
While both coins and tokens are vital to the cryptocurrency universe, their differences underscore the diversity and richness of the blockchain landscape.
Tokens, with their ability to represent a wide range of assets and rights, are pivotal in pushing the boundaries of what’s possible within the digital economy, highlighting the innovative potential of blockchain technology.
Here are three clear examples of crypto tokens:
USD Coin (USDC)
USDC is a stablecoin that is pegged 1:1 to the US dollar, offering the benefits of digital currency while aiming to maintain a stable value.
Operated by the Centre consortium, USDC can be used for global transactions, including remittances and online purchases, without the volatility typically associated with cryptocurrencies.
It operates on several blockchains, providing the flexibility of cryptocurrencies with the stable value of traditional fiat currencies.
Axie Infinity (AXS)
AXS is a prime example of a blockchain-based game that incorporates play-to-earn (P2E) mechanics, where players can earn rewards through gameplay.
In Axie Infinity, players collect, breed, raise, battle, and trade token-based creatures known as Axies.
The ecosystem features its own utility token, Axie Infinity Shard (AXS), and a second token, Smooth Love
Potion (SLP), which players earn through gameplay and can use for breeding Axies.
This innovative model allows players to potentially earn an income through skilled gameplay and participation in the game’s economy.
Monero (XMR)
XMR is focused completely on privacy and security. Unlike many cryptocurrencies that have transparent blockchains, Monero uses sophisticated cryptographic techniques, such as ring signatures, stealth addresses, and RingCT, to obfuscate the details of transactions.
This ensures that the sender, receiver, and amount transferred are all kept completely private. Monero’s approach to privacy makes it a favored choice for users seeking anonymity in their transactions, distinguishing it from other cryptocurrencies that prioritize transparency over privacy.
What is a Crypto Coin?
Think of coins as the foundational building blocks of cryptocurrency. They are native to their own blockchain; think Bitcoin on the Bitcoin blockchain, Ether on the Ethereum blockchain, and so forth.
Coins are primarily used as money; they’re digital cash designed to serve as a medium of exchange.
You can use them to buy your morning coffee (if the café is crypto-friendly), or send money across the globe in a flash without the hefty fees traditional banks might impose.
But coins aren’t just one-trick ponies. They also play a vital role in maintaining and operating their blockchain’s network.
For example, miners (or validators, in some blockchain models) receive coins as rewards for verifying transactions and adding them to the blockchain—a process that ensures the integrity and security of the entire system.
Popular Crypto Coins
While the number of tokens is vast, the number of coins is much fewer. This however, doesn’t change the fact that most of the top 10 cryptocurrencies in the world happen to be coins.
Let’s take a look at a few of the most popular crypto coins:
Bitcoin (BTC)
Bitcoin is the world’s number one largest decentralized digital currency that enables peer-to-peer transactions without the need for intermediaries like banks or governments.
Bitcoin operates on blockchain technology and uses a consensus mechanism called Proof of Work (PoW) to secure the network and manage the creation of new bitcoins.
Bitcoin’s primary purpose is to serve as a digital currency for storing value and facilitating transactions.
Ethereum (ETH)
Ethereum, launched in 2015, is a decentralized platform that enables smart contracts and decentralized applications (dApps) to be built and operated without any downtime, fraud, control, or interference from a third party.
Ethereum extends beyond the simple cryptocurrency use case of Bitcoin, offering a Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes.
Ethereum’s native cryptocurrency is Ether (ETH), used to compensate participating nodes for computations performed.
Ethereum has transitioned from Proof of Work to Proof of Stake with its Ethereum 2.0 upgrade, aiming to improve scalability and energy efficiency.
Ripple (XRP)
XRP is the native digital asset of the Ripple network and is designed to facilitate fast, inexpensive, and scalable cross-border payments.
Unlike Bitcoin and Ethereum, which use blockchain mining, XRP transactions are powered through a consensus protocol to validate account balances and transactions on the system.
This process makes transactions quicker and more energy-efficient than typical blockchain-based cryptocurrencies. XRP aims to serve as a bridge currency in financial transactions between different currencies, enabling secure and instant global transactions.
Cardano (ADA)
Cardano is a third-generation blockchain platform for smart contracts, launched in 2017 by one of the co-founders of Ethereum, Charles Hoskinson.
Cardano is unique in its research-driven approach, using academic peer review and formal methods to ensure the platform’s security and stability.
The Cardano blockchain operates on a Proof of Stake consensus mechanism called Ouroboros, designed to be more energy-efficient than Proof of Work systems.
ADA is the native cryptocurrency of the Cardano platform, used for transaction fees and as a means of transferring value.
Cardano focuses on providing a more balanced and sustainable ecosystem that better accounts for the needs of its users as well as other systems seeking integration.
As you can see, each of these crypto coins represents a significant innovation in the digital currency and blockchain space, with distinct purposes ranging from digital currency and smart contract platforms to payment systems.
What are Coins Used For?
Just remember that crypto coins primarily serve as digital currencies, aiming to improve upon traditional fiat currencies by offering faster, more secure, and decentralized transactions.
Unlike tokens, which are often built on existing blockchains to represent assets or utility within specific applications, coins operate on their own blockchain and are mainly used for financial transactions.
They facilitate a new form of value exchange that is global, accessible, and not subject to the control of any single government or institution.
This opens up possibilities for financial inclusion, allowing people without access to traditional banking systems to participate in the global economy.
Conclusion
Now that you know the difference between crypto token vs coin, isn’t it time your business starts accepting both?
To start accepting Bitcoin, Ethereum, USDC, and other cryptocurrencies, first, simply fill out the form below on the CryptoProcessing.com website.
Shortly after your submission, you will receive an email inviting you to discuss your needs with a knowledgeable representative who will guide you through the platform’s features and answer your questions.
You will then receive a customised proposal from CryptoProcessing.com that aligns with your business model and transaction requirements.
From there all you have to do is provide the necessary Know Your Business (KYB) documentation to confirm the collaboration, and a dedicated account manager will be assigned to support you throughout the setup process.
Once set up, you’re ready to accept diverse cryptocurrency payments from your customers.
Get started below!
