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09/12/2022

Tokens vs. Coins - What's the difference?

Cryptocurrencies are our future, so we need to learn as much as possible about them. Every day, about 100 new cryptocurrencies are born in the world, and each of them has its own characteristics. It is impossible to keep track of all, but they can be defined in a class of coins or tokens. The difference between the types of cryptocurrencies can be unclear, which is why we will now analyze everything in detail and put it on the shelves. Get your notebook and pen ready, we're getting to the point!

Coins vs. Tokens 

It seems that everyone once asked this question because coins and tokens are so similar. All of them are the younger descendants of Bitcoin. But they have several serious differences, from creation to use.

  • Structure differences
    Crypto coins are on the native blockchain, act like fiat (traditional money). Tokens are built on an existing blockchain (not our own). Instead of an exchange of value, tokens are programmable assets through which unique smart contracts are created and executed. These contracts establish ownership of assets even outside the blockchain network.
  • Complexity of creation
    A large part of cryptocurrencies is tokens, because they are much easier to create. Speaking in the language of numbers, about 20% is occupied by coins, which shows their importance and insignificant volume in general.
  • Value differences
    As the name implies, crypto coins are a digital version of money that can be used anywhere. Tokens, in turn, denote assets and documents. In simple terms, you own coins, and tokens represent what you own. A token does not have the same liquidity as a coin, and often they represent company shares, the opportunity to participate in events or gaming entertainment.

Now that you know the difference between coins and tokens, you can take a closer look at them separately. For convenience, we will demonstrate the general separation of types of cryptocurrencies.

Types of Coins

  • Bitcoin
    The world's first cryptocurrency, was invented by Satoshi Nakamoto in 2009. In total, a limit of 21 million Bitcoins was set, and to date, more than 90% of all coins have already been mined. BTC is the most popular and most expensive - its price on the market is now $22 190. After an unprecedented success, many programmers and wealthy investors became interested in crypto, and decided to create their products and use Bitcoin open source technologies to create their  blockchains. This is how Altcoins were born.
  • Altcoins
    From the name, it is clear that these are alternative coins to Bitcoin. An interesting fact is that some Altcoins were conceived as something that could improve Bitcoin technology. This shows their undoubted proximity to the first cryptocurrency. Although Altcoins are built on a similar basic structure, they have many fundamental differences. For example, some Altcoins use a completely different process for creating transaction blocks and validating them. Others may implement new features, such as smart contracts, or regulate price volatility altogether.