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Difference Between Coin And Token - LBM Blockchain Solutions

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Aneesha Rana
Difference Between Coin And Token - LBM Blockchain Solutions

Today, we'll look at a topic that often confuses people new to the cryptocurrency space: tokens versus coins. 


People sometimes use the term "coin" to refer to what others call "tokens" and "tokens" to refer to what others call "coins". Some people will use any name to refer to all digital assets currently available. 


However, there is a huge difference between a coin and a token, so you must know what it is! 


This Token vs Coin guide will start by discussing why there is so much confusion around the two terms. we will give you some explanation of the actual coins and tokens, with examples, and explain how each coin is used. 

At the end of this guide, you will also be able to determine if the digital asset is a token or coin. Why are you here? So let's get started! 


What is the coin? 

When Bitcoin first came out, it set the standard for currency purposes. There is a distinct quality that distinguishes cryptocurrencies from tokens, which are similar to real-world cryptocurrencies.


The currency is determined by the following characteristics: 


1. Work on your blockchain. Blockchain tracks all transactions involving its native cryptocurrency. When you pay someone with Ethereum, a receipt will be presented on the Ethereum blockchain. If the same person pays you later with Bitcoin, a receipt will be sent to the Bitcoin blockchain. Each transaction is protected by encryption and can be accessed by any member of the network.


2. It acts like money. Bitcoin was created with the sole purpose of replacing traditional money. The contrasting allure of transparency and the absence of a name have inspired the creation of other coins, including ETH, NEO, and Litecoin. You can buy goods and services from many of the major companies today, such as Amazon, Microsoft, and Tesla, using cryptocurrencies. Bitcoin recently became the official currency of El Salvador along with the US dollar. 


3. It can be mined. You can get cryptocurrency in two ways. One of them is through traditional mining in the Proof of Work system. Bitcoin hunters use this method to increase their profits. The problem is that I don't have a lot of bitcoins left to mine, so the process is getting more and more difficult every day. Another method is Proof of Stake, which is a more modern way of earning coins. It is lighter in power consumption and easier to do. Cardano is one of the biggest currencies that use this system. 


What is a token? 

Tokens are often called digital currencies. However, this is not true. There is a big difference! Tokens are generated on an existing blockchain. Thanks to the creation and facilitation of smart contracts, the most popular blockchain token platform are Ethereum.


Tokens created on the Ethereum platform are known as ERC-20 tokens. However, there are others like NEO, Waves, Lisk, and Stratis. Although, as mentioned above, the token on the Ethereum platform is known as an ERC-20 token, NEO uses a token known as the NEP-5 token. 


Anyone can generate their token on one of these platforms. The difference between tokens and coins is not that huge, but it can cause a huge headache if it is ignored too often. 


A quick way to decide which one to use is to pay attention to what you're buying. If it is a product, you will often need a coin. If it's a service, there's usually a utility token you can use. 


If you want to develop your coins or tokens and don't know where to start - join LBM Blockchain Solutions! Founded in 2016, LBM Blockchain Solutions is one of the world's largest ruling cryptocurrency exchange platforms serving millions of clients worldwide.

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Aneesha Rana
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