The terms coin and token are often used alike. Both terms are units of blockchain, but there are differences, good to know. Let's start from the beginning.
The cryptocurrency market has evolved a lot in recent years. You can see exponential growth in several cryptocurrencies. I'm pretty sure you have heard about the crypto adoption by institutional players as well. Therefore, it's essential to understand the main concepts behind cryptocurrencies; let's dig in.
Bitcoin and bitcoin is not the same
Did you know there is a difference between Bitcoin with capital B and bitcoin with the small letter? Bitcoin is the whole technology or ecosystem, and bitcoin is the currency itself. Today we are going to talk about another difference between coin and token.
Generally, people know quite a lot about cryptocurrencies and their prices. But they are less likely to understand fundamental differences between, for example, coin and a token.
Tokens and coins are terms commonly used in this field, and most of the time, people think it's the same thing. They do not even realize there is a difference between them.
What is the difference?
Tokens and coins define the value of the particular blockchain. However, tokens are built on the existing blockchain, and coins are standalone digital currencies. The prime example is Bitcoin and Ethereum.
Ethereum is a cryptocurrency. But it's also a network for thousands of different tokens. Bitcoin, on the other hand, has its network and doesn't rely on anybody else.
Cryptocurrencies are mainly used for monetary transactions as a simple, fast, and cheap way to send money. However, tokens have various types of functions and utilities in their ecosystem, as mentioned above.
Ethereum as a pillar for hundreds of other coins
Ethereum hosts a diverse range of digital assets with many functions such as vouchers, utility tokens, or even real-world, tangible objects, non-fungible tokens. These tokens are smart contracts that use the Ethereum blockchain thanks to ERC -20 standard in most cases.
We also recognize Litecoin, IOTA, Monero, Binance coin, etc. And they have all their own register, ledger, or blockchain.
Most tokens were issued on the Ethereum blockchain since it was easy to do it during the ICO boom three years ago. But even now, during the DeFi and Uniswap DEX hype, it is the same. Some well-known examples are Golem, BAT, Link. You would not believe it, but more than 200 000 tokens are registered on the Ethereum network.
Some projects like ICON, QTUM, or TRON have moved to their own blockchain after some development.
Next time we go deeper into other specific topics, and it's vital that you understand the difference between coin and token.