Many people believe that the concepts of “coins” and “tokens” are very close and are practically interchangeable. In fact, they mean different things.
Digital coins
The value of coins is usually based on their own blockchain. This means that they can be divided into smaller monetary units, but their value remains constant.
Crypto coins have the same properties as fiat currencies or government money. They are most often used for the following purposes:
- Payments.
- Money transfers.
- Savings.
Digital tokens
Unlike crypto coins, which have their own blockchains, tokens are generated on existing blockchains. They are digital assets that can be used within a specific infrastructure. There are different types of tokens, each of which serves to perform specific tasks.
Sometimes a token can transform into an independent coin. When this happens, the creator of the token launches a new blockchain.
Basically, coins and tokens are similar to each other. They are all varieties of cryptocurrencies. Both are blockchain-based. The difference lies in the way they are created. Coins have their own independent blockchains. Tokens are created on an already existing blockchain. This technical difference may seem insignificant. However, in most cases, people are not interested in the technical side of cryptocurrencies, but in how they can make money.
Coins are essentially independent currencies. Some users like to use them to pay for purchases. Others invest in coins and wait for them to rise sharply in value. Tokens, on the other hand, are usually used to raise start-up capital. Therefore, people who buy and store tokens usually perceive them as an investment in a startup. Only instead of an IPO, this happens in the form of an ICO. For many, it has become much easier and more accessible to invest in startups precisely through tokens.
