Differences between a coin and a token

Coin and token are the basic concepts of the cryptocurrency market. In one of the thematicarticlesWe wrote about what they mean. Today we'll discuss in more detail the differences between coins and tokens, and whether there's a difference between a coin and a coin. We'll also talk about cryptocurrency forks.

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Coin and coin

Token, coin, and coin are terms that are essential to any conversation within the crypto community. Many novice traders initially confuse them, thinking they are interchangeable. This isn't the case—let's figure out why.

The word “cryptocurrency” is a translation of the English term Cryptocurrency, the name of a type of digital asset.

The internet community first began discussing virtual currency in English. Therefore, the basic terminology of the crypto market is initially English-language.

But as in any other field, slang is used here. For example, traders use wordscoinAnd coinAre these the same concepts or different?

Coin(read as[koin]) translated from English -coinTherefore, in the cryptocurrency community, there is a generally accepted opinion:coinsAnd coins- these are synonyms.

coin=coin

Coins and cryptocurrencies

Bitcoin (BTC) became the first digital currency that operates on its own distributed ledger and is used as a means of payment between crypto market participants.Bitcoinbecame the default standard and was calledcoin.

The phrase is often usednative blockchain coin(=coin).

In other words,coins- these are anycryptocurrencies, which operate on a separate blockchain:

• Bitcoin
• Ethereum
• Litecoin
• Bitcoin Cash
• Monero
• Dash
• Zcash
• VertCoin
• XRP and many others.

coin=cryptocurrency

Characteristics of coins

1. The most important distinguishing feature of a coin is the presence of its own blockchain, usually with unique properties.
2. New coins are created through mining or folk.
3. They have individual encryption algorithms, so they have a high level of security.
4. They function as money: they can be used to purchase goods and services, conduct transactions between users, donate to charity, etc.
5. Coins are an independent type of asset that is stored in the owner's personal electronic wallet (and for this he does not need to interact with a bank or any regulatory body).

Cryptocurrency fork

Cryptocurrency— is a special type of electronic money, the creation and functioning of which is based on cryptographic methods. 

Fork (from the English fork) - a change in the cryptocurrency's software code, which is responsible for determining the correctness of a transaction, according to which a block in the blockchain is recognized as authentic.

In simple terms,cryptocurrency fork - this is a kind of division, as a result of whichnew blockchainIt may survive (and be turned into a new coin) or disappear.

Its future depends on the hashing power of the block branch and its hash rate. Logically, the chain with the greater hashing power has a higher chance of survival.

Is a coin after a fork still a coin?

There's a common misconception that coins after a fork are no longer coins but considered tokens. This isn't true.

A new coin (cryptocurrency) can be created from a fork of another, already existing coin.

For example, Bitcoin is open-source, so anyone can use it to create a new cryptocurrency. This is how Namecoin (NMC) and Litecoin (LTC) emerged—both forks of Bitcoin. Namecoin and Litecoin are fully-fledged cryptocurrencies.coins(coins, cryptocurrencies).

To summarize:

• A new coin can appear not only as a result of mining (minting), but also as a “fork” from the main coin.
• Formed as a result of a fork, it has characteristics that ensure its uniqueness and security, and give it the right to be calledcoin(=cryptocurrency).

What is the difference between a token and a coin?

Token— is a virtual asset, a digital certificate, an analogue of securities (shares) used in the world of fiat currencies.

The token represents the company's obligation to the token holder. It also serves as a unit of account that functions on other platforms.

The scope of application of tokens is wider than that of coins:

• they are used to provide services;
• or to verify or confirm rights to something within the platform itself;
• Tokens can be exchanged for other services or sold for another currency;
• The token is a powerful investment tool for startups, allowing their owners to receive dividends.

The essence of the token

The use of tokens can be understood by analogy with store gift certificates. They can't be used, for example, as tickets to a concert or a football match.

The certificate can be exchanged at a specific location and for a specific purpose - to receive something from that store's assortment.

The token operates according to the same scheme: it is issued by a company on a specific blockchain for use as the main payment instrument, and is aimed at specific services.

Token characteristics

1. A token does not have its own blockchain, and this is its main difference from a coin.
2. It is created and operates on the basis of an existing protocol of an existing platform and complies with a certain standard.
3. The most popular platform for creating tokens is the Ethereum blockchain.
4. Tokens are issued in the quantity required by their creators.
5. If necessary, this quantity can be increased (additional issue)or decrease (token burning).
6. Tokens are managed using smart contracts.

Conclusion

Nativecoinblockchain (coin) andtoken— are completely different crypto market instruments. A coin is a digital currency that operates on its own blockchain, while a token is a virtual asset created on an existing platform.

Getting tokens is easier—just use a ready-made template on one of the platforms. But to get a new coin, you need to develop a new platform or change the code of an existing one (folk).

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