Gamdom Differences between crypto and tokens for newbies
Cryptocurrencies and tokens are frequently used interchangeably but it’s not always the case. Learn the difference with this quick guide.
Gamdom Differences between crypto and tokens for newbies
The world is now more or less familiar with digital assets with Bitcoin (BTC) and Ethereum (ETH) being frequent topics in mainstream news. However, there is one detail that many people overlook which can lead to misconceptions. That is the distinction between cryptocurrency coins and tokens.
Some media outlets use the two words interchangeably except for contexts where crypto coins are favoured over tokens or vice versa. Such decisions are made subconsciously so people never see the issue with it. The truth is that the two words refer to different kinds of digital assets and here’s a guide to distinguish one from the other.
What is the difference between coin and token
The top difference between coin and token is by identifying which platform they are made on as well as their role in its network. To simplify, coins are made specifically to be a mode of payment or store of value. Ownership of the asset is the point of buying them and the platform is how users can send them between each other.
Tokens are meant to be used as fuel for other functions offered by the network. They are essentially convertible into a service or another asset that can be generated by the platform. However, some tokens work for payment as well, giving them similar functionalities as a crypto coin. The only difference is access to decentralised finance (DeFi) services.
What is a cryptocurrency coin?
A more in-depth look at crypto coins shows that it is always independent. Meaning it operates within its own network and you can only own or use it if you have a dedicated wallet. Coins can only be transferred from one user to another via the network while payment is facilitated in a third-party exchange platform.
What are examples of a cryptocurrency coin?
A few examples of crypto coins that are worth noting include Bitcoin (BTC), Litecoin (LTC), and Dogecoin (DOGE). In matters of choosing between crypto vs token, coins are safer investments once their respective network gains enough number of users to make its asset liquid.
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What is a digital token?
Debate in tokens vs cryptocurrency gives favour to the former if you are looking for an ever-expanding service. This is because digital tokens share a common platform. That means any token created can benefit from services made for other assets in the same network. It enables a full DeFi experience among traders, developers, and investors alike.
What are examples of a token?
The most popular example of a token platform is Ethereum. It has a native utility token called Ether (ETH) but it also supports ERC20 and ERC175 tokens for every project created on the network. All of them can be traded and managed using any Ethereum-friendly wallet. The same can be said for tokens on the Tron (TRX) and Solana (SOL) networks.
Clarification on stablecoins as tokens, not coins
After understanding the difference between a crypto coin vs token, you can definitely conclude that stablecoins are tokens. These assets rely on smart contracts which are only available on second generation blockchains like Ethereum and Tron. In fact, Tether (USDT) is built on multiple networks including but not limited to both aforementioned platforms.
All of these are platforms for making tokens and smart contracts. Tether uses their algorithms simultaneously to keep USDT exactly 1:1 with the United States dollar (USD). This is done by holding each network’s native utility tokens as collateral. Other stablecoins like Binance USD (BUSD) and USD Coin (USDC) follow the same system.
Key takeaways summarised
Exploring more of the difference between crypto and token is not exactly important nowadays. This is because both kinds of digital assets have been made liquid enough to be used in frequent transactions. Their differences can simply be summarised to the following key points:
- Coins have their own blockchains while tokens can share a network
- Coins are designed to be used as money while tokens are resources
- Coins and tokens have different market trends
Even with these distinctions, there are still some cases when the line is blurred between the two cryptocurrencies. Such is the case with ETH which is by all accounts a utility token in the Ethereum network. However, it’s valuable enough that it’s traded and regularly used as payment in the same manner as Bitcoin.
It’s more important to identify an asset as it is individually rather than which category it belongs to. For example, BTC, ETH, and USDT will have overlapping audiences but ultimately have separate markets. Thus, you can benefit from keeping each one in your diversified portfolio.
Which is better: Coin or token?
If it can’t be helped and you have to invest in just one side, then learning the difference between cryptocurrencies and tokens can be all you need to make a decision. In most cases, the answer would be in favour of tokens. This is because coins have established a stable status quo where BTC, LTC, and DOGE remain at the top of the market no matter what happens.
Investments in tokens are a lot more likely to bear fruit considering that every asset introduced is useful for something. It can be a solution to make liquidity better in the network as a whole or as a service aiding other projects in this DeFi age. Thus, the better investment in crypto token vs cryptocurrency is the former.
If you are a gambler who is looking for a crypto to use in gambling, then you can also enjoy tokens better. USDT is the most accessible digital asset right now thanks to being a stablecoin. Thus, it is what you can deposit more commonly at Gamdom.
FAQ
There are more details to explore regarding crypto coin vs tokens and here are the most frequently asked questions:
What can I do using cryptocurrency coins?
Coins can be used as either mode of payment or store of value. These can be used in transactions facilitated by its network’s peer-to-peer (P2P) system.
What can I do using tokens?
Tokens’ use depends on what they are designed to do in the first place. Some are meant to fuel the network’s more important functions while others are generated rewards from games.
Where can I buy cryptocurrency/tokens?
Both coins and tokens can be bought from exchanges for cryptocurrencies. All you need is a wallet that supports the asset you wish to invest in and an account in the trading platform you prefer.
