Digital assets have become a part of our daily lives, but understanding cryptocurrency vocabulary can still be challenging. One of the common questions is related to the tokens and coins. Are they the same? Not really. Let’s find out the difference and how to distinguish one from the other.
What are crypto coins?
In simple words, the crypto coin is native to its blockchain asset. The Bitcoin blockchain coin is BTC. There is ETH on the Ethereum blockchain. These assets store value and work as a medium of exchange, similar to traditional currencies. It is why crypto coins are also called cryptocurrencies.
Another unique feature of all crypto coins is the way they are created. Typically, coins are mined using a Proof-of-Work (PoW) consensus mechanism or earned using a Proof-of-Stake (PoS) mechanism.
Initially, Bitcoin was intended to replace traditional government currencies. Along with other crypto coins, it was designed to work in the same way as fiat money and metal coins, which means you can use it for many things with USD or EUR, including:
- storing a value;
- exchange for other currencies;
- payment for goods and services;
- transfer to others.
In addition to these traditional uses, some cryptocurrencies can also use smart contract technology, offering additional features. For example, DASH is an altcoin that acts like a cryptocurrency and allows holders to vote in a decentralized autonomous organization (DAO).
What are crypto tokens?
Similarly to coins, tokens are built with the help of blockchain technology. However, they are not native to the blockchain. Instead, they made on top of it, often using smart contracts to perform various tasks.
Let’s move on to some examples. So, what is FTT crypto? In simple terms, it’s a token. The owners of the FTX crypto exchange launched it as the platform utility asset.
One more great example of the new crypto tokens is WBT. It’s an asset of WhiteBIT. WBT gives numerous benefits on the platform to its owners.
And the final example is Smooth Love Potions (SLP). It’s a utility token of Axie Infinity, one of the best-known P2E services on the market. By earning or purchasing SLP, players can complete exclusive in-game challenges.
While crypto coins mimic traditional currencies, crypto tokens are more like assets. A crypto token can represent a share of ownership in a DAO, a digital product, an NFT, or even a physical object. People buy, sell, and exchange them like coins. However, tokens can’t be used as a medium of exchange.
Crypto tokens are more like coupons or vouchers, while crypto coins are more like USD or EUR.
What about stablecoins?
Stablecoins are cryptocurrencies linked to specific assets. It is a bit of a misnomer, as most of them are ERC-20 tokens. So why are they called stablecoins? The name lends itself to their primary function as a medium of exchange.
For example, USDC is a smart-contract-based stablecoin. It is backed by USD held by the company issuing the token to keep the value of each asset at $1.00.
The use cases for blockchain technology, digital coins, and tokens will continue to expand. At the same time, the overall recognition of these assets will grow, increasing their value and utility.
