Cryptocurrencies and blockchain technology arrived to revolutionize the world of digital money and its payments in the XXI century. It is the reason why developers around the world have shown a lot of interest in this technology, and at the moment they have managed to have applications such as Tokens of which we will talk more in-depth to understand their differences with a cryptocurrency.
What is a Token?
A Token, as we mentioned in the previous article, is a type of digital asset, it is a kind of “token” and it predates cryptocurrencies. They are used to represent a value or utility, as happens for example in casino rooms all over the world, in which chips are used which are exchanged for money.
What is a cryptocurrency?
A cryptocurrency is a digital currency that was designed to function as a medium of commercial exchange. It makes use of cryptography to secure and verify the transactions that are made on the network, and at the same time, it controls the creation of new particular cryptocurrencies. Cryptocurrencies are entered in a limited way in a database that nobody has the power to change unless some very specific conditions are met.
Use of Tokens
The Tokens within the cryptocurrency environment were created with Blockchain technology and can represent anything. We can see that among its various uses are stable cryptocurrencies, whose function is that their price remains stable and does not vary over time. In the same way, Tokens are found as part of the economy of a game, that is, they represent a collectible or simply are financial instruments.
Differences between a cryptocurrency and a Token
The differences between Tokens and cryptocurrencies are not many, however, there are two characteristics considered fundamental: in the case of cryptocurrencies, their field of action is limited to the exchange of value, that is, it is money and has no other uses. In the case of Tokens, these represent a good amount of assets and collectibles. Likewise, Tokens always require the Blockchain technology of a cryptocurrency to function.
Origin of ERC-20 Tokens
One of the blockchains that are most used in the creation of Tokens is Ethereum, which is located in second place in the world of cryptocurrencies, after Bitcoin. To homogenize the creation of Tokens, and that there is a guarantee in their operation in the network, the Ethereum developers decided to create the standard called ERC-20. Due to the ease of creation and the variety of uses, this type of Tokens quickly became popular, and they are currently the most popular.
Currently, there are around 282 thousand ERC-20 Tokens, which are distributed among users around the world, and this figure seems to be increasing. There are many users eager to test existing Tokens and also new Tokens, for this purpose, they need reliable tools to carry out the management and that they keep in constant evolution. To exemplify the above, there is the Bitcoin wallet, which now supports ERC-20 Tokens, as well as for cryptocurrencies, which can be sent, exchanged, and received at a low price through the platform.
What do you think about this topic? Are there any other differences between cryptocurrencies and tokens that you would like to mention?
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