Crypto tokens and cryptocurrencies are integral to the decentralized financial system. It is a fact that both use advanced encryption techniques to assess the veracity of crypto assets. It is also true that there are superficial similarities between the two. However, there are major differences that new users especially should be aware of before dealing. Fungible, divisible, and sometimes limited in supply are the properties of coins and cryptocurrencies. Therefore, the tokens, on the other hand, are digital assets that operate on blockchain networks.
Points of Difference Between Crypto Tokens and Cryptocurrencies
Crypto Tokens
- Crypto tokens run on existing blockchains.
- Their functionality is present in security, governance, and utility in dApps.
- The issuance of tokens can be created at launch.
- Project requirements determine the creation and distribution of these tokens in various quantities.
- Availability of tokens is generally limited and trading happens in decentralized exchanges (DEXs)
- The liquidity of crypto tokens is less because of smaller volumes.
Cryptocurrencies
- Most cryptocurrencies operate on a dedicated blockchain.
- Cryptocurrencies are digital currencies that store value and allow transactions.
- Mining or staking leads to issuance of new coins.
- Cryptocurrencies may have a fixed maximum total supply
- The trade volumes are larger because of better liquidity compared to crypto tokens.
Usage Differences Between Crypto Tokens and Cryptocurrencies
There are significant differences in the usage of cryptocurrencies and tokens. These usages indicate the differences between the intention behind their creation. The uses of crypto coins include paying for goods and services, exchanging for fiat currencies, storing values, and transferring value to others.
Crypto coins use blockchain technology and utilize smart contracts to fulfill different purposes. It can represent ownership in DAO, physical object, NFT, etc. Although crypto tokens like crypto coins are eligible for sale, purchase, and trading. However, they cannot be used as a medium of exchange. Therefore, the utility purposes are entirely different. Hence, people should clearly know the differences between the two before choosing one.
Notable Examples of Crypto Coins and Crypto Tokens
The notable examples of crypto coins and crypto tokens will help first-time users familiarize themselves with the fundamental differences between the two.
Examples of Cryptocurrencies
Bitcoin (BTC) is the most popular cryptocurrency to date. Launched in 2009, Bitcoin continues to be the most valuable cryptocurrency. Ether (ETH) is the second most popular cryptocurrency. It has non-fungible tokens and is the base for thousands of blockchain projects. Cardano (ADA) is an open-source and blockchain platform. It is a green crypto coin and facilitates P2P transactions.
Examples of Crypto Tokens
The most common examples of crypto tokens are Arweave (AR) and Filecoin (FIL). The tokens give users the privilege to store data on a decentralized network. Thus, Axie Infinity is another example of a crypto token that allows players to perform exclusive in-game tasks. Cronos is the utility token for the crypto.com ecosystem. Therefore, it allows token holders to trade crypto tokens for fiat at discounted prices. Hence, crypto tokens offer a plethora of opportunities to its buyers.
Also Read- Positive Impact of Blockchain Technology on The Insurance Sector
Conclusion
The differences between crypto tokens and cryptocurrencies are significant. The question of purchasing coins or tokens relies upon the objectives of the user. It is worth noting that cryptocurrencies (cryptocurrency coins) are digital currencies, while the functionalities of the tokens depend upon the protocol and the aims of the network. Therefore, users who are new to cryptocurrencies and crypto tokens will become accustomed to the differences once they regularly deal with these digital assets and recognize their fundamental distinctions.
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