Sometimes people use the term “cyprtocurrency” to refer to what other people call “tokens” and to refer to what others call “coins.” See below, what is the difference between Token and Coin when we refer to cryptocurrencies and their transaction market. Realizing the possibilities of each term, it is easier to understand its functioning.
What Are Coins
The definition of a digital currency is a native asset of its own blockchain. Think bitcoin, litecoin or ether. Each of these currencies exists on its own blockchain in fact.
Digital currency transactions can be made from one person to another. All “currencies” exist as data in a giant global database. This database (or blockchain) keeps track of all transactions and is verified and verified by computers worldwide.
What Are Tokens
Tokens are created on existing blockchains. In fact, thanks to the creation and facilitation of smart contracts, the most common blockchain token platform is Ethereum. The token function is far beyond being a monetary value for trading as is money.
Let’s get to know some types of tokens. They are known as Security or Asset Tokens, Payment Tokens, Equity (reference) Tokens, and Utility Tokens.
Security Tokens (security and title)
They are best known as the futures contract mix, public initial offering, and other trust contracts. Most tokens issued by the value guarantor (ICO) are security tokens.
Whoever buys them is investing their money with profit expectation. They are treated in the same way as traditional securities, where there is regulation.
Equity Token (Reference and Comparison)
More difficult to find, if a token represents any share or capital of the company that issues it, it is a capital token. However, few companies have tried such an ICO because there is not much regulatory guidance on what is legal and what is not.
Utility Token (application)
These are specific types for singular functions, also called application tokens. They are used to provide people with access to a product or service. They are also rare because most tokens are expected to gain value based on their limited supply.
Payment tokens have no other purpose than to pay for goods and services, their functionality resembles currencies, but they remain real bonds and not cryptocurrencies in fact.
The simple definition of coins and token: coins are native to your own blockchain. Tokens are built on top of another blockchain, such as Ethereum, NEO or Waves.
Coins are generally used simply as money; however, some currencies have other uses. They can be used to feed applications, such as a title to validate a transaction on a network or be used to feed smart contracts and token transactions.
Sources: Bitdegree, Gemini.