If you are new to cryptocurrency market, it’s probably hard for you to figure out the difference between tokens and coins. The biggest reason why this concept is pretty complicated is its underlying technology – Blockchain, which is in computing language. However, if you spend a few minutes to read this article fully, you will completely find out about cryptocurrency concept.
What is cryptocurrency?
First we need to talk a little about the definition of cryptocurrency. Cryptocurrencies are digital currencies which work as a medium of exchange. This system uses cryptography which secures and verifies both transactions. bitcoin was the first cryptocurrency represents the fist cryptocurrency which started it all. Although it’s not the first coin ever, its creation marks an important milestone in the realm of digital currencies.
The difference between tokens and coins
We can categorize cryptocurrencies into coins- or altcoins and tokens. You need to know that most coins don’t even function as a currency or medium of exchange, however, we still call them cryptocurrencies. Bitcoin works as a unit of account, a store of value and as a medium of exchange- just like a real currency.
Therefore we consider all coins after Bitcoin as cryptocurrencies which we call coins or altcoins. If you are looking for a way of investment, knowing the difference between tokens and coins will also help you choose the best one to put your money in. So below is a detailed explanation of coins and tokens.
Coins or altcoins
Alternative cryptocurrency coins or altcoins are often used interchangeably. These coins are alternative to Bitcoin. Many altcoins are built up on the basic framework of Bitcoin. Therefore, most altcoins are peer-to-peer involving a mining process. Through coins users can solve difficult problems. From unlocking blocks, and offering efficient and cheap ways to carrying out transactions on the web. But even with many overlapping features, altcoins vary widely from each other. These coins differ themselves from bitcoin with a range of procedural variations, including different proof-of-work algorithms, different means by which users can sacrifice energy to mine blocks, and application enhancements to increase user anonymity.
Tokens in fact represent a certain asset or utility which resides on top of another blockchain.This abstract concept can represent any any assets that are tradeable and fungible and is issued by a private entity. There are many similarities between tokens and coins. They are both block-chain based and their value is accepted by a community.
However, the difference between tokens and coins is that tokens serve a much broader purpose. You could use tokens in a broader range of applications which makes them more than just a currency. Most experts in this market believe that Etherium’s blockchain is more trustworthy that bitcoin’s and tokens rely on the former.
“A token is a unit of value that an organization creates to self-govern its business model, and empower its users to interact with its products, while facilitating the distribution and sharing of rewards and benefits to all of its stakeholders.” says William Mougayar the author of The Business Blockchain.
What does ICO mean?
ICO stands for Initial Coin Offering. The definition of it is offers investors some units of a new cryptocurrency/crypto-token in exchange against cryptocurrencies like Bitcoin or Ethereum. People have been using to fund the development of new cryptocurrencies since 2013. ICO has revolutionized not only currency but also the whole financial system.