Difference between Coins, Altcoins and Tokens

With every new terminology emerging in the crypto market, people tend to be very confused between the most used terms “Coins and Tokens”. People usually consider coins and tokens as same and often use them inversely unknowingly, but the fact is both carry vast differences. This guide will help all the crypto-users to clear their confusions.

What is a Coin?

The coin is a digital currency the same as the physical currency having its own value and used as a source of payment. In technical terms, Coins are cryptocurrencies having its own value and operating on its own blockchain with its own protocol. It is created using complex cryptography and purely used for making payments faster and securely from one end to another.

What is an Altcoin?

The first coin to enter the crypto sphere was the Bitcoin which was based on a public decentralized ledger recording all the transactions. After, the success of Bitcoin many other Coins were created by tweaking the Bitcoins’ original protocol often termed as Altcoins (Any coin other than Bitcoin) for eg. Ethereum and Ripple with the purpose of using them same as Bitcoins.

Features of Coins & Altcoins:

1. Fungible: Each unit of the coin has the same value equal to another coin.
2. Divisible: Can be divided into much smaller units of significant worth.
3. Acceptance: Widely accepted as a mode of payment globally
4. Supply: Coins have a limited and constant supply
5. Portable: Can be carried cross-borders without any worry
6. Durable: Coins are digital so they do not degrade with time
7. Uniform: All versions of a similar category have a similar value

What is a Token?

The token represents digital assets issued on particular projects which are fungible and used for payments as the coins are used. But, there is a difference, Tokens does not operate on their own blockchain rather they are introduced on another platform. For eg. ERC-20 tokens built on the Ethereum platform. To understand this in simple terms, consider the following real-life example; you have a ticket to a movie, which allows you to watch a movie at a particular time but the same ticket won’t allow you to board the train and travel. Similarly, a token is used as a payment source but they carry a value only at a particular time based on the issued project.

Features of Tokens:

1. Multi-purpose: Tokens can be used in various applications such as payment, signing digital contracts, etc.
2. Secure: Tokens are a long cryptographic string of numbers and letters which are very hard to guess and it can be used as a password for protecting documents or digital assets.
3. Accountable: Tokens can be used for auditing the shares or stock held by multiple users
4. Recoverable: Some tokens can be recovered in case you sent it to the wrong address

Based on the different functionality, the tokens are further classified as a utility token, security token, equity token, and payment token.

• Utility tokens: They are also known as application token giving access to people inside the project. For eg. BON token
• Security tokens: They authenticate a person’s identity electronically by storing personal information. For eg. DAO
• Equity tokens: They represent any stock or equity of the company
• Payment tokens: They are used only as a source of payment of goods and services.

We hope now that you have understood the basic difference between the widely used terms “Coins and Token”.