When you hear the word "blockchain token," you probably think of cryptocurrencies directly. So what is a token and what is the difference between token and coin? If you do not know them, you should read this article.
What is a Token?
Tokens also known as crypto tokens are units of value developed by a blockchain-based organization or project on top of an existing blockchain network. While they generally have deep compatibility with the network's cryptocurrencies, they are a completely different class of digital assets.
Cryptocurrencies are native assets of specific blockchain protocols, while tokens are created by platforms built on top of those blockchains. For example, the native token of the Ethereum blockchain is Ether (ETH). While ethereum is the native cryptocurrency of the ethereum blockchain, there are many other different tokens that also use the ethereum blockchain. Crypto tokens built with Ethereum include DAI, LINK, COMP, and CryptoKitties, among others. These tokens can provide a variety of functions on the platform they are built for, including participating in decentralized finance (DeFi) mechanisms, accessing platform-specific services, and even playing games.
What is the difference between a token and a coin?
A simple explanation of the difference between coins and tokens is that coins have their own blockchain while tokens do not. Another thing to note is that coins are generally used for one thing (payments), whereas tokens have various use cases, which can include payments , but also other things. For example, when comparing coins or cryptocurrencies to utility tokens, utility tokens are used to access products or services.
For example, Basic Attention Token (BAT) is used in the Brave web browser ecosystem. Advertisers pay publishers for audiences in BAT, audience members receive BAT to view the advertiser's ads, and audience members can use that BAT to donate to publishers or keep BAT for themselves.
Uses of Tokens
Security tokens - similar to securities in the old financial system (OldFi), they represent shares in a company, but with all the benefits of a blockchain
Asset Tokens - Tokens backed by real-world assets such as gold or real estate
Stablecoins - represents more stable coins - at least relative to cryptocurrencies such as Bitcoin - currencies such as USD or EUR
Non-Fungible Tokens (NFTs) - NFTs represent unique things such as artwork, baseball cards, and in-game items (think "virtual real estate" or unique virtual pets)
I hope now you will know What a token is and the difference between Tokens and Coins. Tokens can be in the form of cryptocurrencies such as Bitcoin or Ethereum. There are also stablecoin tokens, which are “cryptocurrencies” backed by real-world assets.
