A Sky Rocking Debate- Crypto Currencies (Coins and Tokens)

Cryptocurrency is now a fairly common term. Most folks must have examined different sorts of cryptocurrencies and the way they’re traded. Some of you might have invested in this remunerative but unpredictable digital aid class. While most of you must have authorized its validity and the risk involved in it. Sometimes we unwittingly assume cryptocurrencies (including altcoins e.g., Peercoin, Litecoin), and crypto tokens (Bitcoins, Security Tokens) reciprocally. Though similar, these two have fundamental differences and it is vital to not confuse them. Both are digital assets.

What’s the difference?

Well, the difference is that crypto tokens are raised on already existing blockchains but cryptocurrencies (altcoins) own their blockchains.

What is a cryptocurrency?

A cryptocurrency can be said as blockchain’s ‘native currency’ — like Bitcoin or Ether — and it runs directly on a blockchain protocol. Many times, cryptocurrencies are not to pay transaction fees or incentivize users to stay the cryptocurrency’s network secure. Investors put their money into cryptocurrency as these coins typically function as a medium of exchange to shop for goods and services, or as a store useful to be exchanged for fiat currency — like Bitcoin or US Dollar — at a later date within the hope of getting good returns or a minimum of an equivalent value as invested.

What are a Cryptocurrency Exchange and the way to Open a Trading Account?

Cryptocurrencies are decentralized, meaning they do not believe in a central issuing authority. They are constructed on a blockchain and have a disseminated ledger for users to fix the transactions. This allows the imposition of the principles in a reflex and automatic manner. Such coins use cryptography, an encoding technique, to secure the basal structure and network system.

What is a crypto token?

Crypto tokens often share deep compatibility with cryptocurrencies, but they’re a special digital asset class. For example, Ethereum is also considered to be a blockchain and its local token is Ether (ETH). But there are few other tokens — DAI, LINK, or COMP — that are also relying on the Ethereum platform. Similar to cryptocurrency, tokens can have worth and they ought to be exchanged. But a token can also represent material assets, or a service or value. For instance, some crypto tokens constitute assets like art or maybe land. The process of making tokens and assigning them value is named tokenization.

With the crypto industry growing at a rapid pace, these unique assets will still grow and people will keep assigning value to those tokens against the asset they represent. A very plain elucidation of a token would be that it’s a ‘smart contract’. These contracts can demonstrate any kind of physical or digital asset e.g., rights management tools. Crypto tokens represent a flock of rules and every token is a component of a blockchain address. Only the person that has the private key for the blockchain address can access the token. And this person is considered as the custodian or holder of that token.

Conclusion

Often, we encounter people using cryptocurrency to ask for both — native coins and tokens. Given the difference between them, a more correct usage to ask both these digital asset classes would be to call them crypto assets.

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