If you’re still new to the world of crypto, you’ll be forgiven for getting confused with the technical lingo that’s out there. After all, many of the terms are often familiar words but with whole new meanings. For example, tokens and coins are two very popular concepts and while they might sound similar, they are in fact very different.
If you’re hoping to learn more about token vs coin in a way that’s much easier to understand, look no further. GMR Center take a closer look at what tokens and coins are, and what the differences are.
What is a coin?
A crypto coin can also be known as cryptocurrency or a native coin, and is characterised as an asset that has its own blockchain, as opposed to running on another asset’s blockchain. The blockchain keeps track of all transactions that involve its own, or native, coin.
Coins are typically used for payments and were originally created for the purpose of replacing traditional money and means of making payments. Transactions of coins can be made from one person to another, but no physical coins actually move. Instead, coins exist as data on the blockchain, where the transactions are tracked, checked and verified.
Coins can be earned in different ways, with one popular way being through traditional mining. This is where people can work to validate the transactions in return for a reward. This is known as the ‘proof of work’ system and can be done to boost earnings.
Some of the best examples of coins include Bitcoin and Ethereum.
What is a token?
On the other hand, a token runs on another blockchain. A token can have many different uses, such as utility tokens that can be used to access a product or service. Most tokens exist to be used with decentralised applications (dApps), and they are generally used to activate features of the application they were designed for.
Tokens are one of a kind items that change in ownership. When a token is spent, it will physically move from one place to another as it becomes someone else’s property.
A popular example is a non-fungible token. An NFT is completely unique and can’t be replaced by something else, a bit like a one of a kind trading card. NFTs are becoming popular ways of buying and selling digital art, and they can also help you to unlock in-game items.
Knowing when to use a coin or token
It can be helpful to know when it’s best to use a token or a coin, especially if you plan on continuing your journey into the world of crypto. Generally speaking, if you are looking to buy a product, you’ll will likely need coins. If it’s a service, you might wish to look at whether there’s a utility token you could use.
The industry has continued to grow at an exciting pace over the last few years, so it’s the perfect time to educate yourself and learn more about what this could mean for the future!