Cryptocurrencies are broadly divided into two categories, namely Coins and Tokens. A lot of people barely know the difference between them. Many think that coins mean exactly the same thing as tokens and use them interchangeably in their day to day conversation. But this is not the case. These two types of assets although similar in a lot of regards, they are still fundamentally different. To put it simply, coin basically refers to cryptocurrency that has it own blockchain and works independently of other platform while token refers to cryptocurrency that operates and based its existence on another platform for instance Ethereum. E.g. Tron, Vechain and Bytom
If we take a look on Coinmarketcap, a platform where all the cryptocurrencies are listed, we will see that they have categorized all the cryptocurrencies into two major groups, namely coin and token. You can take a look at the list if you wish to find out the nature of a specific cryptocurrency you have in mind. For the token list, there is also an additional column that indicates the platform which the token is based upon as shown in the screenshot below
We shall outline a couple of differences that are evident and eminent between these two categories of cryptocurrencies – the Coins and the Tokens.
Differences between Cryptocurrencies: Coins and Tokens
Coins are essentially digital financial assets. They are currencies in the real sense of the word because they are capable of being exchanged and used for trading. Tokens are also digital financial assets. But rather than being the actual assets in themselves like the coins, token is a representation of the actual financial assets, reflecting value upon entering the blockchain; they are separate entries on the blockchain and facilitate largely the creation of several other applications that are decentralized.
While the Coins use a unique and independent blockchain for each of their variety, the Tokens can have several entries into the same blockchain. In essence, each Coin has its blockchain completely independent of any and all other Coins. This is not the same with the Tokens. We can find instances where several Tokens are built upon and entered into the same blockchain.
In creating Coins, there has to be a complete modification of the protocol from scratch to accommodate the unique features of each coin. This is not so with tokens. Creating tokens is much easier. To create new tokens, one does not have to create new blockchains from scratch or begin to modify the codes that exist on the particular protocol. All of the tokens, being but representations of digital assets, use the same codes and protocol upon entry of their values on the blockchain. One can create token with merely a few negligible modifications to the protocol, and this is only in very few circumstances.
- Ease and difficulty of creation
Due to the need to have a separate set of codes and particular protocols, be they new or modified, in the creation of cryptocurrency Coins, the level of difficulty involved is comparatively higher. With the easily adaptable nature of Token codes and protocols, and the ability to have each new Token entered on the blockchain using the same standard protocol/template, creating tokens is far more easy and convenient in general.
- Platform for Operation
Coins by their nature and mode of creation are designed to operate by themselves independently. Coins share this unique feature with the everyday currency bills we find in our society. The ability to use the cryptocurrency Coins to trade as well as a unit of measure and exchange of financial assets is what makes it unique and gives it satisfaction of the appellation of ‘cryptocurrency.’ The Tokens, on the other hand, are not capable of being operated in isolation. They are not in themselves direct financial assets. They are rather a representation of digital financial assets as discussed. Thus, the tokens have to be based upon another platform, such as Omni and Ethereum, for them to exist and operate. They are not capable of direct entry on the blockchain.
Coins and Tokens are the two main categorizations of cryptocurrencies. Despite the similarities that exist between them, they are still, as discussed, fundamentally different. Be that as it may, their operation and functionality are not in any way affected by these differences, as both streams of cryptocurrencies stem from the same hub of operational functionality – the Blockchain.