What Are Coins and Tokens? What Are the Differences Between Them?

What Are Coins And Tokens? What Are The Differences Between Them?

Coins and tokens are cryptocurrencies whose usage has become widespread with the advent of blockchain technology.

Sibel Uluçay

Two of the concepts that have entered our lives with the widespread use and popularity of cryptocurrencies are the terms coin and token. Although these two terms are often confused with each other, there are some fundamental differences between them. We have examined the basic differences and usage areas between coins and tokens in the blockchain technology and Web 3.0 ecosystem.

What Are Cryptocurrencies Used For?

Cryptocurrencies, which entered our lives with Bitcoin in 2008, are becoming increasingly widespread as virtual units are used in many different sectors today. After the popularity of Bitcoin, altcoins, in other words, alternative coins, and tokens emerged. As a result, the crypto world became increasingly widespread and divided into different types. As a result of this popularization, people's interest has increased and different cryptocurrencies have started to be used for different purposes. Users started to use blockchain technology in many different areas, from cryptocurrency exchanges to NFT platforms, Metaverse projects, and token production with launchpads.

What Are Coins and Tokens?

Coins and tokens are digital assets that have entered our lives thanks to blockchain technology. The term 'coin' is used to refer to digital assets that have their own blockchain network. Coins can be traded, bought, sold, and transferred on a blockchain exchange. For example, Bitcoin and similar coins have their own blockchain networks. People have started using coins created through mining on distributed networks instead of traditional currencies. The use of cryptocurrencies is still not regulated worldwide, and regulatory efforts are ongoing in many countries.

Tokens, on the other hand, are digital assets that use another blockchain network and do not have their own blockchain network, unlike coins. As digital assets that do not have their own blockchain network, tokens are used, exchanged, and traded on another coin's network.

There are also different types of tokens within themselves.

What Are the Types of Tokens?

Tokens are divided into types among themselves. These types can be defined as follows:

Equity Token
Credit Token
Utility Token

What Is Equity Token?

Equity tokens, also known as a stock token, has similar characteristics to the IPO system. The benefits provided by equity tokens are parallel to those provided by investors in the public offering process. Equity token holders receive a fixed commission.

These tokens are subject to securities laws. It is believed that equity tokens will bring about a significant change in the representation of company shares. Equity tokens are also being worked on in the real estate sector.

What Is Credit Token?

Credit tokens refer to tokens created for the purpose of providing credit. Any investor can lend money to an entrepreneur with a credit token. Later on, the investor will receive a certain rate of return based on the entrepreneur's earnings.

What Is Utility Token?

Utility tokens can include multiple types within them and can be compatible with multiple types at the same time. Utility tokens also enable their owners to access a specific product or service. However, they are not used for investment purposes.

What Are the Differences Between Coin and Token?

The most important differences between coins and tokens can be listed as follows:

· Having/not having its own blockchain network

· Being developed from scratch or created with a certain standard

· Creating/not creating digital assets under oneself

Having/not having its own blockchain network

The most fundamental distinction of the cryptocurrencies produced in the blockchain world is whether they have their own blockchain network. For a cryptocurrency to be defined as a coin, it must have its own blockchain network created from scratch. On the other hand, cryptocurrencies without their own blockchain network are called tokens.

Being developed from scratch or created with a certain standard

Another important difference between coins and tokens is that coins are created from scratch on their own networks without being bound to a standard, while tokens are created using a specific standard. For example, the ERC-721 standard is used to create tokens on the Ethereum network. This standard determines and is used to structure the token. These standards that provide the token structure can also have differences among themselves.

Enabling the creation of digital assets on its own network

Another difference between coins and tokens is that standards can be developed on the blockchain networks of coins to enable the creation of tokens. With these standards, other tokens can be created on the blockchain network of the coin.

Since tokens, cannot provide an infrastructure for developing standards and creating other tokens because they do not have their own blockchain networks.