Crypto coins vs. Tokens
Welcome to the latest issue of CapitalRollup Digest! Today’s digest is for July 27th and should take about 5:00 minutes to read. We’ll get right to it.
- What does the Market Look like today? (Top 5/10 popular Cryptocurrencies)
Crypto coins vs. Tokens
Almost all investors journeying into the crypto space often make the common mistake of mixing up a crypto coin for tokens or vice-versa.
The basic similarities between crypto coins and tokens are that both can be bought and sold online on exchange platforms and stored in cryptocurrency wallets. Additionally, all coins are tokens, but not all tokens are coins.
In this article, we will explore how the two terminologies differ and are not similar.
What are Coins?
Coins known as Cryptocurrencies are decentralized, peer-to-peer digital currency on a blockchain network. Similar to traditional fiat currencies, they serve as a medium of exchange and hold a particular value. They’re fungible, divisible, acceptable, portable, long-lasting, and in limited supply.
An example is Bitcoin, the first established Cryptocurrency. All other cryptocurrencies that entered the crypto market following BTC are referred to as “Altcoins”
What are tokens?
They are used to represent digital assets that are fungible and tradeable, including everything from commodities to voting rights that serve a range of purposes, and are also built on the blockchain hosted by another platform, such as Ethereum.
We will look at three divisions of tokens:
Non-fungible Tokens: NFTs are unique tokenized assets, and each has a digital signature. The word non-fungible means it can’t be swapped for another token or something else. They can be anything (artworks, in-game items, and music). You can own it, buy it, or sell it. These tokens are built from the ERC-721 token standards.
Some examples of NFTs are:
- Bored Ape Yacht Club (BAYC): launched in April 2021 with a collection of 10,000 digital apes.
- Decentraland: is a virtual world where users can own land, houses, and art.
Security Tokens: These tokens are financial assets that can indicate ownership and investment and can offer perks such as voting rights to their holders. They run on the Ethereum Blockchain.
Utility Tokens: In a nutshell, utility tokens are designed to provide access to a project’s ecosystem. These tokens can be purchased to fund projects and trade with products or services inside the issuer’s network. In addition, they can use them for fundraising, usually through initial coin offerings (ICOs) and private sales.
Coins vs. Tokens: How are they different?
• They’re different based on Blockchains
Coins run on their Independent Blockchains, but crypto tokens run on top of an existing blockchain.
• Non-unique and Unique
The crypto coins are non-unique and serve only as payment options. A BTC would remain the same value regardless of the platform. Compared to coins, tokens have a variety of specific functions that make them more unique.
• They are created differently
Coins are created using computational power (Mining), while tokens are minted by writing a smart contract on DLT.
• They represent different things
Tokens on the blockchain represent physical assets that can be assigned a price like real estate whereas coins represent money — meaning you would be able to buy these tokens with cryptocurrency.
• Tokens can be non-fungible
A non-fungible token is a unique digital asset. The word non-fungible means that each token is not exchangeable with another token, as opposed to coins like Bitcoin, which are fungible tokens, meaning each Bitcoin has the same value as every other Bitcoin.
Final Take
In a nutshell, the difference between the two isn’t extensive but it is essential to understand these terms to reduce risks and make better decisions in today’s volatile market.
For as little as $5, investors can invest in various crypto indexes at CapitalRollup. www.capitalrollup.com
•Trivia 🤔
What does a smart contract represent?
A. Transaction layer
B. Business logic layer
C. Proof of Work
D. Transaction API
Find the answer in the next issue of CapitalRollup Digest. 😉
Crypto Word Of the Day!
💡 White Paper
A detailed explanation of a cryptocurrency, designed to offer satisfactory technical information, explain the purpose of the coin, and set out a roadmap for how it plans to succeed. It’s designed to convince investors that it’s a good choice ahead of an ICO.
The term used in a sentence:
— Many white papers are designed for Business to Business or marketing purposes.
Community Update 📢
We organized a Twitter Space session with 3 industry leaders where we discussed “Share your Bear Market experience & CeDeFi implosions”, you can listen to it right here
•What We Are Reading Today 📰
Differentiating Tokens, Coins, and Virtual Currencies. Read more
What Is the Difference Between Cryptocurrency Coins and Tokens? Read more
Learn and invest in Crypto with friends 💰
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