Although users sometimes use Coins and Tokens interchangeably, they have different meanings. They might not appear that different initially, but they often serve different purposes. Identifying the virtual coins and tokens apart is vital for digital currency users. So, let’s check out the differences and which is a better investment option.

Understanding Crypto Coin

Coins are virtual assets that consist of their fundamental protocols and blockchains. They function in a way that is almost the same as how fiat assets work and provide the best payment methods or keeps of value. 

Users normally think of coins when they encounter or see the term cryptocurrency. The leading digital currencies are Ripple, Ethereum, and Bitcoin. 

What is the Purpose of Crypto Coins?

When Bitcoin came into existence, people thought it replaced traditional fiat assets. Like other cryptocurrency coins, Satoshi Nakamoto designed BTC to function in the same manners as traditional currencies, which means users can use it for different things normally with USD or EUROS, including: Storing value, buying goods and services, swapping with other currencies, and sending to others. 

Together with the traditional uses, a few virtual coins can benefit from smart contract technology to provide extra features. For instance, an altcoin DASH works as a digital currency but also provides users the capacity to participate in a DAO (decentralized autonomous organization). 

List of Leading Crypto Coins

Following are some of the most popular virtual coins. 

• ETH (Ether): ETH is a leading cryptocurrency coin and more than a digital currency. Because of its development and execution of smart contracts, ETH has become home to many NFTs and blockchain projects.
• BTC (Bitcoin): Launched in 2009, BTC is the world’s foremost and most popular cryptocurrency coin. BTC’s head start has enabled it to become a valuable digital currency.
• ADA (Cardano): ADA is a decentralized blockchain and open-source platform that was among the foremost to run on a PoS (Proof-of-Stake) consensus, gaining its reputation as a green digital coin. Charles Hoskinson, the ETH co-founder, launched it in 2015 and facilitated P2P (peer-to-peer) transactions with the coin ADA. 

About Crypto Token

Unlike crypto coins, tokens do not feature their blockchain. Rather, they work on other digital currency networks. Different institutions and projects usually develop them on top of other chains. 

Since they utilize the same blockchain, virtual tokens, and their initial coin sometimes share a few similarities, and they are compatible. However, crypto tokens are not a payment method or storage of value: they’re a separate asset type. 

Some blockchains support the development of tokens. Ethereum (ETH) is the leading one, consisting of the generally used token standard, ERC-20. Each token depends on a technology known as smart contracts and comprises four defining features. They must be: 

• Trustless: Tokens do not depend on any central authority because they are decentralized; instead, the regulation determined in its protocol utilizing smart contracts runs them.
• Transparent: Users can check and validate the transaction information and the regulations that govern the token.
• Programmable: Developers use smart contract technology to create and launch the tokens. They help program and outline the tokens’ features, rules, and purposes.
• Permissionless: Tokens must be available to each user. They don’t need any specific credentials from the users. 

Purpose of Crypto Tokens

Users can use the tokens like they use coins, as it has speculative asset investment. However, tokens have real purposes, unlike coins, representing physical currencies or even particular utilities or features. 

Crypto tokens permit cryptocurrency projects to provide some of the users access to things such as dApps (decentralized applications), exclusive merch sales, blockchain games, and others. They allow users to participate in protocol upgrades and different governance proposals.

Also Read: Coinbase vs Cash App: Which Is the Better Option?

List of Different Kinds of Tokens

Developers have divided the tokens into sub-groups based on their purpose and design. Below are the common ones. 

NFTs 

Non-fungible tokens (NFTs) are the most popular list of tokens. They don’t serve any practical purpose, and users treat them as luxury items. Each NFT shows a different asset. 

NFTs are virtual certifications of ownership. They show distinctive virtual assets like videos, art, or tweets. Like other tokens, the developers of NFTs use smart contracts technology. 

Security Tokens 

Security tokens are similar to external assets that users can trade as securities. These tokens are the tokenized version of stocks, bonds, property, and others. Due to this, different financial regulators manage their issuance and swap. 

Sometimes, the security tokens only show a share or stake in the associated digital assets. Its users can get special advantages, like a portion of the profit or the capacity to partake in a few decision-making processes. Tokens can offer an instant settlement, market participants with transparency, and other advantages of crypto.

Presently there are two kinds of security tokens: asset-powered and equity tokens.   

Utility Tokens

Utility tokens users can access goods and services. Sometimes the tokens provide users the right to connect to a platform or a virtual product; otherwise, they offer a discount on fees or free access to that platform. Utility tokens are the backbone of many dApps (decentralized applications) and other decentralized finance (DeFi) projects. As an outcome, having a utility token can give users advantages far beyond monetary ones. 

Governance Tokens

As the name suggests, governance tokens allow users to participate in governance decisions. Usually, the decisions get implemented automatically as a system functions on smart contracts. However, in a few cases, the project managing team must manually carry out them. 

Governance tokens empower the users; hence, design projects that utilize them are notably less centralized. 

Examples of Tokens

There are many tokens available in the crypto industry. Non-fungible tokens include famous collections such as Bored Ape Yacht Club or the world’s foremost tweet. Maker (MKR) is the top example of a governance token. 

ETH blockchain-based tokens are the most trusted and widely used. However, a few other networks are beginning to captivate more developers, particularly as Ethereum gas fees continue to increase. Solana and Tron are other leading chains with smart contract features and get selected by most token developers. 

Some virtual currencies have separate token versions on various blockchains, for instance, USDT, a stablecoin. 

What Distinguishes a Token from a Coin?

The key difference between crypto and coins is that they have their blockchain, whereas tokens don’t. Also, developers have created tokens with the real purpose in mind, so the cost of the token depends on market speculation and supply and demand, even though this is the case for a few coins, particularly those that have additional features such as ETH or one that users can use as payment in a few places such as Bitcoin. 

Presently there are thousands of tokens in circulation-much more than virtual coins. This is because tokens are simple to create, as they do not require coding a new blockchain to create them.  

Users must know the difference between a crypto coin and a token as it assists them in better understanding the digital currency they are investing in or trading. Eventually, users can determine whether a digital currency is a token or coin online.  

Conclusion

After reading the above tutorial, you must have understood the difference between crypto tokens and coins. Now the question of purchasing tokens or coins depends on your goals. With less fees, you can buy both from different cryptocurrency exchanges, such as Crypto.com.

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