The world of cryptocurrency is not always the easiest to understand, there are always terms or concepts that are more difficult to assimilate, especially by those who do not have computer technical knowledge, since all the technology on which they are based is made with programming and computer elements.

Within these concepts there are two that are usually confused because they have a great similarity in their final use: tokens and coins. Next we will mention the 3 essential differences between them and the 3 most outstanding similarities that make many people confuse them. But before talking about differences or similarities, let’s talk about each of them to better understand what they are and how they work.

What are coins?

Coins, also known as altcoins, are digital coins and have their origin in the same bitcoin technology. This means that, although they operate with blockchain, they do so independently of other cryptocurrencies, with their own “accounting book” and their own transaction history. Likewise, there are also digital currencies alternative to bitcoin that have created their own structure.

All these new cryptocurrencies that have as origin the concept p2p (peer to peer) of bitcoin, have like objective decentralize transactions and yield the control to the users. In the previous article titled What is the ethereum? know more about this cryptocurrency, we explain how this cryptocurrency works that you can classify as coin, within the category of alt coins or alternative currencies to bitcoin.

What are tokens?

Tokens, also known as tokens, are also digital assets that can be used to operate in different transactions. They are simpler to build because they do not require a whole new programming since they are based on a chainchain already built and operate safely, protected by the security protocols of the blockchain in which it was created.

It is a very common term because around 80% of the cryptoactives that are currently handled are tokens or tokens, since they are much easier to create and do not require a new code for a good operation, additionally their operation allows to give a value that agree to both parties involved in the transaction with which the users who exchange them have a better experience.

Essential differences between coin and token

A coin is an alternative currency with an independent blockchain. This is the main difference between both digital assets. This fact gives greater independence to the coin and allows it to operate with different values, depending on the unit that has been defined for its blockchain, that is why the ether (the coin of ethereum) does not have the same value as the dash or that the bitcoin

A token can be considered as a unit of fluctuating change. It is normal to see the movement that exists in the value of crypto currencies, for example, in the case of bitcoin, it can have a value in the morning and another value at the end of the day. This is due to the fact that the tokens vary and take a different value according to the market demand and the purchase-sale offers of that digital currency.

Tokens have value, but it is not a proper value but a value that they take according to the market. This explains the previous point in which the token is spoken of as a unit of fluctuating change, that is, the value is not really of the token but of the cryptocurrency on which it is constructed. Thus the value of an ethereum token will not be the same as that of a bitcoin token.

Similarities between coins and tokens

Both operate in the blockchain network. Although each one does it differently, they are operating in the blockchain technology and provide the benefits of the security that it offers. Although they work separately and differently, both coins and tokens have the same purpose: decentralized and safer operations for investors.

Both are units of value. Although this is a bit more complex to understand, this is true, both the tokens and the coins are units of value. The value of each one depends on the operation that they have inside their own blockchain and it will not always be the same, because in the case of the tokens it is fluctuating and it is what finally gives value to the cryptocurrency.

They work in a decentralized manner. The reason for being of the cryptocurrencies is the decentralization and giving greater power to the users who intervene in the transactions, being themselves who protect the security of their digital assets, control the way in which they operate and exchange. There is also the fact that intermediaries are eliminated, so that a third party is no longer needed to complete a financial operation.

What do you think about this topic? Did you know the differences between coins and tokens?

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Image of Erdenebayar via Pixabay.com under the creative commons license.


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