What is the difference between a coin and a token? Are they same and this is just some common terminology to further complicate the already much complicated crypto niche? Or is this something along with many such nuances that make it so difficult to develop an understanding of cryptocurrency trading for newbies? The answer is both yes and no. Yes, in the sense that yes, these are the same and such names like coins and tokens for the same thing are only meant to confuse users. And no, in the sense that there exists some difference between a coin and a token. Let us look into more details into what the difference is between a coin and a token for cryptocurrency, and in general too.
What is the Difference Between a Coin and a Token: The General Difference
If we push our consideration for cryptocurrency to the back seat for once, and take a general glance on the idea of difference between coin and token, it is so. A coin refers to a method of payment while a token may represent anything to signify or associate. It can represent something negative or something positive. For example, it can refer to some shares of a company that can go up or down in value with time.
What is the Difference Between a Coin and a Token: The Cryptocurrency Difference
When we consider this in the crypto domain, the difference between a coin and a token surfaces up even further. Of course, in many places these two terms will be used interchangeably to signify the same thing, but technically these are different. Let us point out these differences so that we do not get confused or misuse the terms any more in our crypto talks and transactions.
What is the Difference Between a Cryptocurrency Coin and a Cryptocurrency Token
- Coins and tokens are both created via cryptography but are two different entities.
- Coins are digital equivalent of money, but the tokens are not. Tokens are more of the digital assets used for payment inside a project.
- Coins do not give the holder the right to participate in the network where it is used for payment, but tokens give such rights to the holder.
- Coins have a limited supply and are divisible and portable unlike tokens in cryptocurrency.
- Anyone is allowed to join a public open blockchain upon which coins are based.
- Coins cannot perform anything other than serving as money, but tokens can be multipurpose. They can change many facets as per the project requirements wherein these are used.
- You can buy a token with a coin, but vice versa is usually not true. Coins can have an independent existence while tokens cannot. They have to be based inside the project they are attached to.
As an ending note, both coins and tokens are important in cryptocurrency. While coins help to buy and sell things, tokens help to generate value for some crypto projects. However, practically these are used interchangeably in most places and might sound confusing.