Token and coin — what is the difference?
Coin and token — are names of digital assets. On different websites you can see these terms, but you will have the question — are they the same? Actually, the answer is “yes” and “no” at the same time. Let’s make it clearer for you.
What is coin?
Coin is cryptocurrency (digital currency) that uses its own platform, where it is in independent circulation. Coins don’t require a different platform, they operate on their own blockchain, where they are the native currency. Bitcoin is an example of this type.
There are two common types of coins:
• Coins those are created with the original source code of the bitcoin blockchain are its derivatives.
• Coins those developed on the basis of a unique blockchain.
What is token?
Tokens are a cryptocurrency that is built on the basis of an existing blockchain or protocol. Tokens are usually assets or utilities. Tokens are easy to create, because they are made on top of an existing blockchain. Most of the current new tokens are based on the Ethereum blockchain.
Tokens can be divided into two types:
• Utility tokens. This type of tokens is created not for investors. They are used for transaction, exchange, access to products and services that represent themselves as the utility program. Since such tokens are not an asset for investing funds, they are not subject to the laws governing the circulation of money.
• Tokens-share. This is a type of valuable papers, coupons that can become an investment goal. They are like investments in the market of bonds and shares. The most valuable of them are the equivalent of a certain quantity of goods or services.
Coins can be the basis for creating tokens, but tokens have more features that can make them not just a currency, but something more. Tokens can be the evidence of ownership in real estate or business, and they can be used in the voting process and surveys. In General, tokens provide people with more useful opportunities than simple speculation, which is most interesting to coin holders.
Is it legal to use the words “coins” and “tokens” as synonyms? Yes and no at the same time. Although the differences are significant, there will be confusion in the market for a long time to come. These terms will be considered interchangeable until they are revised by the public over time. In addition, do not forget about hybrid forms, which can be the subject of a separate discussion.