Crypto 101: Difference Between Cryptocurrency Coins and Tokens
You must have been hearing something like ‘coin’ and ‘token’ in the cryptocurrency space, right? And you start wondering if they are the same thing.
Yes, they are similar, but not the same.
A coin is any cryptocurrency that is fueling transactions on a native blockchain, it is also used to reward those who provide some kind of computational power to keep the blockchain alive. An example is PoW (Proof of Work) blockchains like Bitcoin.
Ethereum is a coin on the Ethereum blockchain. XLM is a coin on the Lumen blockchain.
I hope you now understand it.
Now, a token is any cryptocurrency that is created on a blockchain.
Anyone who can create a smart contract can do this. I can deploy a token before I go to bed this night😃. It is that easy.
96% of cryptocurrencies that are in the market are tokens. You don’t need to build a blockchain to create a token, but you must build a blockchain to have a coin.
I will give you a scenario you can relate to.
✔️Blockchain is like a hectare of land
✔️ Coin is the giant mansion or skyscraper on it
✔️Tokens are small rooms in the mansion.
Does this analogy make sense to you?
I hope you gained something today as you are just getting familiar with the industry.
Ojeniyi Ayobami Abimbola is a blockchain content developer, full-time cryptocurrency trader, and consultant. He provides tonnes of valuable information through his WhatsApp status every day, you can connect with him HERE.
