Beginners guide to native tokens

The crypto market’s emergence has changed the way people think of financial markets. With great features and user experience, the industry will continue to grow and improve as years wane. 

If you want to hop on the crypto bandwagon and invest in one, it is best to learn more about its core concepts to have a better understanding on how they work. One of these concepts is native tokens.

What are native tokens and why are they important? Here is everything you need to know about them and what the native token definition is: 

What does native token mean?

What is native token definition? Native coins are a blockchain’s inherent digital currency. Every blockchain in the crypto market has a native coin that is used to reward validators for adding blocks to the blockchain. These coins also act as the currency within the blockchain. 

Native tokens are also often referred to as base or intrinsic tokens since the blockchain’s design allows for a particular token function in it. They are used to represent the value of a crypto in its own ecosystem. For instance, Ether is the native coin that represents the value of Ethereum’s own ecosystem. 

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Examples of the best native coins 

There are known native coins out there that define the crypto market. Know more about them and discover if they are worth investing on in the current market The following are some of the most popular native coins in the crypto market: 

Ether 

Ethereum is a decentralised platform that was created where users can create decentralised applications and even coins that can greatly benefit the crypto industry. Ethereum’s Ether is sometimes confused with the platform itself. To clear the air, Ether is the native coin while Ethereum is the open-source blockchain.

Ether also has an intrinsic market value in any crypto exchanges that you will encounter This means that users can use it as a payment method for online goods and services at any eCommerce merchant or retailer that accepts Ether. 

Binance Coin

Another example of a famous native token is Binance Coin (BNB). It is the native coin of the BNB Beacon Chain that powers the Binance ecosystem. It is also one of the world’s most famous utility tokens. 

This coin was launched through an Initial Coin Offering (ICO) that was primarily issued as an ERC-20 token. While it initially ran in Ethereum’s network, the ERC-20 BNB token was later replaced with BEP-2 BNB at a 1:1 ratio. 

Aside from using it to trade in the Binance ecosystem, this native coin can be used for buying virtual assets, travelling, credit card payments, and when investing. Some of the notable examples of trading platforms where you can trade BNB are Coinbase and Binance. 

ADA

ADA is a decentralised proof-of-stake (PoS) blockchain that is designed to be a better alternative to its proof-of-work (PoW) network counterparts. What’s great about ADA is that each of its holders has a stake in the Cardano network. This coin is deemed unique because when stored in a crypto wallet, it can be delegated into a stake pool to earn unique rewards. 

Fun fact: ADA is named after Augusta Ada King, Countess of Lovelace who is a writer and English mathematician. She is known for writing about Analytical Engine and was the first person to understand that machines are also about creating an algorithm to function aside from pure calculation. With this in mind, Ada wrote the first algorithm in the 1800s and was recognized as the first computer programmer. 

LUNA

LUNA is the native tokens crypto of Terra which is mainly used for staking and mining. It is also considered a stablecoin that is pegged to the US dollar with a 1:1 ratio. Just like other native coins, LUNA is for rewarding users for validating or participating in the network and to pay for transaction fees. 

SOL 

Solana is a platform that aims to provide a foundation for decentralised apps (dApps) that prioritises stability and scalability. Solana’s native token, SOL, is a utility token that is a means to transfer value as well as provide blockchain security through staking. 

Solana native tokens use Proof-of-Stake consensus mechanism with timestamped transactions and low barrier of entry. With this, the number of transactions validated depends on the number of coins the validators have accumulated. 

Just like Ether, SOL is used to incentivise users and execute programs that support Solana’s native token blockchain network. 

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Importance of native coins

To clearly explain the importance of native coins, think of it as mitochondria which is the powerhouse of the cell responsible to fuel energy for every cell in your body to survive. Native coins have the same function. They fuel the system to keep the operation going. 

Without native coins, there won’t be rewards for the validators and a common currency which can be used to trade within the system. Thus, native coins make every transaction easier. 

For instance, Ethereum’s blockchain has reshaped several industries with the use of smart contracts to develop dApps. It basically paved the way for other coins and decentralised or crypto-based applications to enter the market. 

Native vs non-native coins: What is the difference?

Even though native and non-native coins function similarly, there are differences. Non-native coins are created to use only within the blockchain. It also relies on other native coins to function. 

Non-native coins are developed depending on the standards of the native coin they are relying on. Meanwhile, native coins can be used on other platforms and can stand on their own. 

Why non-native coins rely on native coins 

Non-native coins rely on native coins because the blockchain of the former largely depends on a few features of the latter's own blockchain. A great example of this is Chainlink which depends on Ethereum’s blockchain. 

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Examples of the best non-native coins

Even though non-native coins hugely depend on native coins, they are still worthy of your investment and have a lot of benefits. There are a few prominent non-native coins that are worth considering. Some of these are: 

LINK

Chainlink is a decentralised network that provides real-life data to Ethereum’s smart contracts. This coin is known as a decentralised oracle network or blockchain abstraction layer that uses blockchain technology to allow computations on and off the chain. 

Its native token, LINK, is used to compensate node operators. LINK is an ERC677 token which is an extension of ERC-20. The tokens act as data payloads that feed the needed data from off-chain sources to smart contracts. This then acts in response to the data given by the token itself. 

USD Coin

USD Coin or USDC is a digital currency that is referred to as a stablecoin which is pegged to the US dollar. Developed by a regulated fintech company, Circle, USDC is popularly used in the crypto and fiat industry. In fact, it is recognised as a highly liquid digital dollar supported by more than 190 countries. 

Since it is a fully-reserved stablecoin, every USDC in circulation is backed by US treasuries which means that you can always trade it with US dollars. Circle might not be as popular as PayPal or Apple Pay but it is a regulated and licensed money transmitter that works under the US state law. This is the reason why the financial statements are annually audited. 

AAVE 

Unlike other coins, it allows users to borrow and lend crypto. To make it easier, it uses smart contracts to immediately automate the process. Since smart contracts come with predetermined and set rules, there is no need to manually make a contract to seal the deal. 

What’s great about AAVE is that it can be staked or traded on other exchanges and earn interest. In contrast with fiat currency, no monthly payments are needed. 

Is it possible to trade native and non-native coins with each other?

Yes, it is possible to trade a native coin for other non-native coins and vice versa. This can easily be done on crypto exchanges. 

Learning about native coins is a crucial part of understanding the crypto industry in general. It provides you with the right information to give you insight as to how crypto works. By knowing these core concepts, you’ll make better decisions when it comes to investing your crypto. 

If you have crypto lying around, it’s best to invest to earn more or use them to wager at crypto casino sites like Gamdom. For more information about the crypto industry and native coins, visit Gamdom for incredible and fun blogs to help you learn more about them.

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Words: Vonn Consul