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Crypto coins vs. tokens: differences and examples

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Crypto currencies have seen lot of rise and popularity in the last few years and huge number of people is now investing into it to get more and more profits.

Everyone wants to be rich and earn some extra money. And, investing in crypto currencies is very easy way of getting extra chunk of money. People choose this way of earning because it is very simple. You just have to invest in some coin and then wait for the price to rise. But, keep in mind this is not as simple as it looks. There are lot algorithms that are working behind crypto and one must need to understand it fully before investing into any of crypto currency.

Crypto Coins vs. Tokens

Knowing the difference between tokens and coins helps you to better understand the crypto market. Token and coin projects may have different technical challenges. You will also be able to discuss crypto developments while showing a deeper understanding of the market. This article explains the differences between tokens and coins, as well as their individual uses and key attributes.

Tokens behave very similarly to crypto currencies, in the sense that they are not a type of currency available in a blockchain, and can be transferred from one account to another. However, unlike cryptocurrencies, their behavior is not built on the blockchain software itself. Instead, their behavior comes through the use of smart contracts. These smart contracts count the units of token transferred between accounts.

In order to transfer units of these tokens, the account signs an employee who tells the smart contractor to deduct the number of units from the token in its calculation, and enter the same number of units in the token in calculating another account. Many tokens correspond to the EIP-20 token standard, and in fact, most of all smart contracts on blockchain networks tend to be of this type; making it easier for users, wallets, transactions, etc. to interact with them. When working with blockchain networks, it is important to note these differences.

Importance of Crypto Tokens

Tokens allow developers to build a cryptocurrency without having to build a blockchain for that crypto currency. That’s great because it makes the process of developing cryptocurrencies much faster, easier, and less expensive.

For developers who want to create their own crypto currency, blockchain development is a difficult technical task. The blockchain needs to be able to process transactions quickly at low cost, and it needs to withstand attacks so that crypto criminals can steal crypto.

Building a blockchain is not the end of the process either. The new crypto currency also requires authenticators to verify its transaction. As cryptocurrencies are fragmented, they rely on people who choose to become guarantors and lend computing power to the blockchain.

For example, Bitcoin relies on Bitcoin mining, but that requires people all over the world to use mining equipment. New coin developers also need to think about how they will attract enough guarantees to keep the blockchain secure and avoid fraudulent transactions.

A quick option to make a crypto token. Instead of building a blockchain from the ground up, developers can revert a piggyback to an existing blockchain, such as Ethereum. Their crypto token may work on the existing Ethereum platform, which already has a secure system to verify transactions and use smart contracts.

What are Crypto Coins?

People usually have much confusion regarding coins and tokens. They usually take the both as the same terms but they are very much different from one another.

A crypto currency coin is a digital asset found in a blockchain network that is used as an exchange and as a value store. It works on its blockchain network, not on other blockchain assets. This also means that these coins do not leave the network, but the changes only appear in account ratings. For example, when Alice transferred money to John, changes were made only to the balances of both of their accounts at a premium.

Importance of Crypto Coins

Prior to Christmas 2017, the crypto coins space went through a process called moon 1. That is, their prices went completely and ridiculously high in the sky. It was a completely wrong time to buy crypto. Because just before Christmas, the entire market crashed, losing about 20% of the global market. But cryptocurrencies is as important and permanent, or limited to 100 years as some might think: transactions are fast, digital, secure and global, which actually allows for record keeping without the risk of data loss. In fact, fraud has been reduced.

How coins are made

Cryptocurrencies or coins are made by mining, a process that usually uses either proof of POW activity or proof of PoS stake. PoW uses large amounts of computer power to solve mathematical problems, and creates coins to reward miners. PoS methods create and validate transactions based on co-financing. Additionally, crypto currencies are used to pay transactions on their networks.

Cryptocurrencies are classified – that is, they do not rely on any central authority to operate. Instead, computer nodes control all transactions and activities. Although the code allows users on the network to work within the rules automatically – unauthorized and untrustworthy, this means that mutual trust is not required, as transactions are forced into smart contracts that only work when agreed terms are met.

Main Differences

Here are the differences between coins and the tokens that will going to fade away all the confusions about these two terms. See this out now:

  • Coins are designed to be used directly as cash and as a value store. In other words, owners can use them to pay for goods and services. On the other hand, while tokens can be used to pay, they also have other types of resources and play an important role in DeFi, games and DEX.
  • For example, AAVE protocol token. Aave is a DeFi protocol that allows crypto borrowing and lending activities without the average person. Aave is built on the Ethereum network and all their transactions use AAVE tokens, using the popular ERC20 token standard.
  • Coins are made on the blockchain platform. The project must design security agreements and reward systems, outline how the coin will be made, manage the provision of the coin, and how to record and process transactions.
  • At the same time, tokens are based on existing protocols for their operating blockchain. Interestingly, the token can work on several block chains. This gives the tokens the advantage of speed and flexibility, which means they can be easily exchanged with other digital assets. For example, Tether issues tokens on several blockchains, including Ethereum, Tron, Bitcoin, Algorand, SLP, and OMG.
  • Coins have a native blockchain, while tokens do not.
  • It costs less to create a token than a coin because the former lives on an existing blockchain.
  • Tokens can eventually become coins as the project develops its blockchain and moves their tokens to the new blockchain as a coin. Successful migration cases include Binance Coin BNB, Tron (TRX), and Zilliqa ZIL which previously existed as tokens on the Ethereum blockchain.
  • Coins primarily serve as a payment crypto currency, while tokens on the other hand can use a variety of usage conditions.

Examples of Crypto Tokens

Now, let’s get into the examples of Crypto tokens.

  • According to the State of the DApps, there are more than 3,000 DApp currently running on various blockchains. DApps – extended applications – adopt an acceptable way to manage data using blockchain technology. These DApps are focused on Extended Finance (DeFi), a blockchain-enabled solution for real-world financial problems. Each DApp has a digital asset or token that users interact with. The Ethereum blockchain is a popular platform for creating crypto token projects.
  • Tokens have a large list of uses within their ecosystem. Tokens on crypto platforms such as Golem (GLM), 0x (ZRX), Civic (CVC), Raiden Network (RDN), and Basic Attention Token (BAT) are used as a means of exchange, as well as transaction certain functions. that is from computer power borrowing to using domain trading (DEXs).
  • Augur (REP), Keep Network (KEEP), True bit (TRU), Chain-link (LINK), and Gems (GEM) tokens are used to perform work and / or maintain integrity for their projects.
  • Other popular crypto tokens include Maker Dao (DAI), Integration (COMP) and Decentral and (MANA). These tokens are used for borrowing and lending, games, and NFTs.

Crypto Tokens has five main categories:

Utility Token

Utility tokens give users access to a blockchain-based service. For example, Basic Attention Token (BAT) is used by advertisers in the Brave web browser to pay for publishers, who reward their audiences with BAT when viewing ads.

Activity Token

Tokens like Tether (USDT), Binance USD (BUSD), and Dai (DAI) are known as stable coins. They become collateral and are often targeted at fiat money. This means that they are not accustomed to the popular crypto variables and, therefore, are useful as a means of exchanging and storing value.

Security Tokens

Security tokens are common securities such as stocks and shares converted to digital tokens in the blockchain. These tokens give the owners the right to a piece of company in which they have invested. Like traditional securities, the owners of a security token also receive a reduction in the company’s profits.

Non-Viral Tokens

Non-fungible tokens (NFTs) reach effective transaction values, which are expected to be at least $ 17.7 billion by the end of the year. The unique cryptographic tokens available in the blockchain are used to digitally represent the unique content ownership. They can be sold or exchanged, however, they cannot be exchanged thus making it impossible to represent their equal value for each.

Governance tokens

Governance tokens give token holders the right to nominate and vote on changes within a blockchain project. In doing so, users directly influence the performance and direction of the protocol.

Crypto token projects use a few token standards to create tokens. ERC20 and ERC721 are some of the most widely used token standards, which allow for the creation of tokens that freely interact with the Ethereum blockchain. Although the ERC20 standard supports tokens including the Ethereum suite for DApps, ERC721 is designed to create seamless tokens.

Examples of Crypto Coins

Here are the most popular crypto coins that are holding the crypto market all over the world.

1: Bitcoin:  One of the most popular currencies, Bitcoin is considered the original crypto currency. It was developed in 2009 as open source software. The author of the white paper that invented this digital currency was under the pseudonym Satoshi Nakamoto.

2: Litecoin: Litecoin is another well-known crypto currency out there in the market. Litecoin was introduced in 2011 as an alternative to Bitcoin. Like other cryptocurrencies, Litecoin is an open source, a completely separate payment network, meaning there are no central authorities.

3: Ethereum: Created in 2015, Ethereum is a type of crypto currency which is an open source platform based on blockchain technology. While tracking digital currency transaction ownership, Ethereum blockchain also focuses on using the programming code of any fixed app, which allows it to be used by app developers to pay transaction fees and services on the Ethereum network.

4: Ethereum (Classic): Ethereum Classic is a version of the Ethereum blockchain. It uses smart contracts in the same divided area. Smart contracts are applications that operate in a systematic manner without the possibility of malfunctioning, research, and fraud or a third party interface. Like Ethereum, it offers a value token called old ether used to pay users for products or services.

5: Zcash: Zcash is a digital currency based on the original Bitcoin code. Designed for scientists at MIT, Johns Hopkins and other prestigious educational and scientific institutions, it is based on a separate blockchain. A key feature and distinction of Zcash is the emphasis on privacy. Although not a service available to investors on the Equity Trust platform, users can send and receive Zcash without disclosing sender, receiver, or transaction amount.

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