The Real Difference Between Coins and Tokens

Look, I get it. The term “cryptocurrency” is all over the place but for the most part, you’ll find that people just use obscure terms to make themselves appear intelligent. The words “coins” and “tokens” are often used as synonyms, however, that is not a fact because they are two different animals. Let’s take a look at them so that it doesn’t leave your eyes glazed over.

Think of It Like Cars

If you’re searching for some new ways to get to town. There are two choices:

• You can buy your vehicle. It’s yours. You pay the bills, change the oil, and have to deal with the strange noise that is coming from the engine. Then, it’s your responsibility when your transmission malfunctions in the most dire of circumstances.
• You could also lease a car. It is paid by someone else to take it for a spin. If something goes wrong? It’s not your fault. You’re borrowing from someone else’s infrastructure.

Coins Are Like Owning a Car

Bitcoin, Ethereum, Litecoin They all have blockchains. They created the entire system from scratch, and manage it by themselves. If you’re a part of the systems, you are in complete control of the security features, transactions, transaction verification, and all other aspects that keep the system in operation.

Tokens Are Like Renting

Coins and tokens ride an ride with another blockchain. Usually, Ethereum’s. They pay a “rent” and get to make use of all the technology and infrastructure without having to construct it.

Crypto Coins vs Tokens: Why Would Anyone Choose a Token?

The group responsible for Basic Attention Token (BAT), which is the basis of Brave – the crypto that powers Brave browser – was faced with the option of. They could have spent the years developing their blockchain from scratch or be focused on the thing they were most passionate about: creating a web browser that blocks advertisements and lets users reward content creators.

They decided to create an Ethereum-based token for the following reasons:

• The system is already secured (no requirement to recreate the wheel)
• It’s well established (people have already credited it)
• They can concentrate on the actual product

A smart decision, surely? It’s like, “Let Ethereum handle the boring infrastructure stuff while we build something people want to use.”

Tokens vs Coins Crypto: Growing Up

Certain projects begin with tokens and then become large enough that they choose to “move out of their parents’ house” and begin building their blockchain.

Crypto.com has done exactly that. They have launched their mainnet (fancy means to say “we have our blockchain now”) and have since validated the transactions. This is like renting an apartment and saving enough cash, then purchasing their own home.

However, here’s the problem: It’s not possible to transform your token into an actual coin using a magic device. There are a few steps to take:

• Develop a brand new blockchain
• Build a bridge to allow users to exchange their old tokens with new ones
• We hope that everyone will make the change

The Weird World of Multi-Network Tokens

Some cryptocurrencies are prone to commitment. For instance, take LEO as an example. It’s a currency in the Ethereum, Binance Smart Chain, and Hive networks. It’s like living across three cities.

There’s also this mind-bender that some coins can be represented in other tokens. I recently made a purchase of Binance-peg Ethereum Token on the Binance Smart Chain network.

Did it Ethereum? Nope. It’s like a coupon that says, “This is worth the same as Ethereum.” Why should you bother? Since a typical Ethereum transaction can cost around $20. However, using the Binance Smart Chain only costs around 50 cents. It’s similar to purchasing a gift card from the store since it was discounted.

Crypto Coins vs Tokens: Five Different Flavors

1. Platform Tokens 

These allow apps to be made on blockchain. Uniswap is a token that allows holders to vote on any modifications and possibly receive a share of the earnings in the future. This is like having shares in the company, which gives you the ability to vote.

2. Security Tokens

They are a sign of ownership for other things. Do you want to put your money into gold but don’t have a vault packed with gold bars at your home? Instead, buy a gold-backed token. Be sure to have the gold to back it. If not, you’re purchasing empty promises.

3. Transactional Tokens

They allow you to move money quickly and inexpensively. xDai is tied against the US dollar and has incredibly cheap fees. It’s as low as $0.00002 for every transaction. It is possible to make 47,000 transactions with just $1 fees. You can do that at your bank!

4. Utility Tokens

They do have a purpose. The Basic Attention Token could be used for advertising in Brave. Brave browser. This is similar to buying tokens in an arcade, but they’re also used for particular uses beyond earning money.

5. Governance Tokens

They give you the right to vote. More tokens = more votes. Through Uniswap, the token owners could be able to vote in the future on matters such as the changing of fees for trading. This is, of course, a sign that those with the largest number of tokens are the ones with the most influence, and it sounds like the old systems cryptocurrency was designed to disrupt. However, that’s a topic for a different day.

Bottom Line

When you’re thinking about cryptocurrency with blockchains or ones that rely on different infrastructures, they all have their place within the crypto ecosystem. No one’s superior – it’s about deciding what best suits your preferences.

If you’re working on a huge project that demands total control, you may need a blockchain. If you’re focusing on solving an issue that you aren’t able to solve and do not need to worry about maintaining your blockchain, this could be the right choice.

Similar to cars, certain people require a car certain cars, while some are more comfortable renting. It is important to know what is the best option for your particular situation.