Difference Between Tokens and Coins in the Cryptocurrency

The enhanced technology and digitization led to not only the emergence of cryptocurrency but also its popularity. There have been many takers of it. But if you notice closely, cryptos are never exactly homogenous. They are referred to both as coins and tokens. For this matter, many individuals are not even aware if they are purchasing cryptocurrency tokens or coins. Are they both the same things? No, they are completely different and you can distinguish here at https://bitcoin-storm.app/ the difference and functions of these two.

Are you familiar with how blockchain works? Then you are already aware that such decentralized ledger technology comes with the capacity of supporting decentralized apps that smart contracts enable. If you proceed a few more steps then you will frequently come across terms such as “tokens” and “coins”. These two terms are nearly constant in an activity for performing on the blockchain. Yet they are completely distinct. They are applicable to totally different uses.

Do you find both these terms confusing? Then you should not worry. Read along to clear your doubts and master the peculiarities of both these terms.

Coins in crypto

You will see coins as a blockchain’s national currency. They are the native currency of a given blockchain. They are not only distinct but have peculiar functions to only one blockchain. It is the same way as USD is to the US, CNY is to China and AUD is to Australia. Thus the coins are to a given blockchain.

Blockchains deploy their programming language, consensus algorithm, transaction verification speed, and governance model. Such blockchain’s native token can then be used for indicating the transaction fractions that will get decided as fees for processing.

Usually, coins are seen to perform functions like transaction completion and governance on a given blockchain. They use cases that no cryptocurrency token may take on. It can get used as one yardstick to admit validators to the chain.

As one network of blockchain is built, its coin accompanies it to aid it in propelling its functionality across the wide network.

Tokens in crypto

On the other hand, tokens are native to many decentralized apps built on a network of blockchain. Blockchains are built from the scratch but blockchain decentralized apps are not. dApps are created on any existing blockchain network. Usually, tokens are native to such apps.

Coins operate at the level of blockchain. Tokens operate at the level of the app. It means that for any user to complete a transaction on one blockchain, he needs to rely on the coin of the blockchain to complete the transaction successfully.

Tokens have their cases of use in the different services that a dApp offers. They can get used to lending services, staking, rewards, and insurance. They are also created as securities that are asset-backed. They represent assets of the real world. Regardless of the case, the usefulness of a token correlates directly to the services that its represented dApps render.

Another unique feature of a token is its capability of existing on multiple blockchains. It is mainly vital as most blockchains yet lack the interoperable capabilities enabling communications cross-chain. dApps are able to maintain many instances across different blockchains for extending their services to different users.

It has become crucial because of the congestion and the transaction’s high cost on the Ethernet network of Ether. To ease the experience of the user, different dApps too extend their projects to various blockchains with the same capabilities like Near, Cardano, and Solana. For example, the USD Coin or USDC mainly exists on the Ethernet network of Ether. Yet with the lapse of time, it has expanded to other networks like TRON, Algorand, and Solana.

Conclusion

The next time you decide to buy assets on any blockchain be alert. Remember that as long as it is not the blockchain’s native asset itself, you can tag this asset confidently as one token. Yet if the asset gets tied to functions like fees of gas, you must not think anymore. You are ready to buy a cryptocurrency coin. Distinct as well as simple; coins are blockchain native and tokens are decentralized applications native.

Add Comment