What is the difference between Token and Coin? [Cryptocurrencies]

Tokens can be used as bonuses on occasion, points, advantages in a game, for example, among others. Cryptocurrencies are basically substitutes for physical money. Secondly, they have their own blockchains. Tokens, on the other hand, emerge on blockchains that already exist.

Sometimes people use the term “coin” to refer to what other people call “tokens” and “token” to refer to what others call “coins”. See below what the difference is between Token and Coin when we refer to cryptocurrencies and their transaction market. Understanding the possibilities of each term makes it easier to understand how it works.

What are Coins?

The definition of a digital currency is an asset that is native to its own blockchain. Think of bitcoin, litecoin, or ether. Each of these currencies actually exists on its own blockchain.

Digital currency transactions can be made from one person to another. All “coins” exist as data in a giant global database. This database (or blockchain) keeps a record of all transactions and is checked and verified by computers all over the world.

What are Tokens

Tokens are created on existing blockchains. In fact, thanks to the creation and facilitation of smart contracts, the most common blockchain token platform is Ethereum. The function of a token goes far beyond being a monetary value for exchange like money.

Tokens are created with the support of currencies, but they are not.

Let's take a look at some types of tokens. They are known as Security or Asset Tokens, Payment Tokens, Equity (reference) Tokens and Utility Tokens.

Security Tokens (security and title)

They are best known as a mix of futures contracts, initial public offerings, and other trust contracts. Most of the tokens issued by ICOs (security tokens) are security tokens.

Those who buy them are investing their money with the expectation of profit. They are treated in the same way as traditional bonds, where there is regulation.

Equity Token (Reference and Comparison)

Harder to find, if a token represents some share or equity in the company that issues it, it is an equity token. However, few companies have attempted such an ICO because there is not much regulatory guidance on what is legal and what is not.

Utility Token (application)

These are specific types of tokens for singular functions, also called application tokens. They are used to provide people with access to a product or service. They are also rare because most tokens are expected to gain value based on their limited supply.

Payment Token (Pagamentos)

Payment tokens have no other purpose than to pay for goods and services, their functionality resembles currencies, but they are still securities and not actual cryptocurrencies.

In short

The simple definition of coins and tokens: Coins are native to their own blockchain. Tokens are built on top of another blockchain, such as Ethereum, NEO, or Waves.

Coins are often used simply as money; however, some coins have other uses. They can be used to power applications, such as a security to validate a transaction on a network, or be used to power smart contracts and token transactions.