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This content has been automatically translated from Ukrainian.
The crypto market is presented in the form of a complex system, inside which a lot of operations are available, in particular loan in cryptocurrency . If you decide to try your hand at crypto trading or investing, you should first understand the basic components of the crypto world. Newbies have many questions, and one of the main — differences between cryptocurrency and token. These terms are often used interchangeably, but there is still a difference between them.
The main differences between a coin and a token
The main difference between cryptocurrency and token lies in their technological basis. In simple terms, the — cryptomonet is the operating system and the — token is the application that runs on it. Let's understand in more detail:
- Cryptocurrency coins or coins. These are digital assets that have their own independent blockchain. Examples of coins — Bitcoin and Ethereum. The main purpose of — coins is to serve as a means of payment within its network and maintain its security. For each transaction on the network, you need to pay a commission in the native coin of this blockchain: for example, ETH coin is used inside the Ethereum network.
- Tokens. These are assets that are created on the basis of an already existing blockchain platform. Comparing cryptotoken versus coin, the former does not have its own blockchain, but uses the infrastructure of the parent network. For example, most tokens are built on the Ethereum blockchain using the ERC-20 standard. Tokens can perform various functions: provide voting rights, access to services, represent a real asset digitally.
Practical significance of cryptocurrency coins and tokens
Traders and investors need to understand the difference between cryptocurrencies and tokens. Thanks to this, you will know exactly what you are buying and what it can be used for. Below are some key points that show the practical difference between tokens and coins:
- Functionality. Coins are primarily used to pay transaction fees on their network. Tokens are developed for a specific purpose within the framework of a specific project. For example, WhiteBIT token is used on the Ukrainian crypto exchange WhiteBIT to reduce trading commissions, gain access to new products, participate in raffles, etc.
- Creation method. Developing a new blockchain and launching a coin — is a complex and costly process that requires a large team and huge resources. It will be easier and cheaper to create a token on an existing network.
- Value. This parameter for the coin depends on its blockchain — security level, speed, scalability. The value of a token is related to the success of the project that produced it and the demand for its services.
When choosing between a cryptocurrency coin or a token, you should understand that both types of assets are important in the ecosystem. They just perform different tasks. Coins — are the foundation on which the crypto industry is built, and tokens — are its multifunctional and flexible tools.
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