How Cryptocurrency Coins, Tokens and Altcoins Differ

When you enter the crypto universe, you will encounter terminology such as coins, tokens, and altcoins. If you’re new to this space, it makes sense to get a clear understanding of these concepts. Since cryptocurrency and blockchain domains are fairly new and yet to be explored fully, you might get confusing and often inaccurate information about its related terms. Let’s  understand how cryptocurrency Coins, Tokens and Altcoins Differ. This blog aims to give you a concise, jargon-free account of crypto terms and their implication on your investment decisions.

What is a Coin?

In simple terms, all virtual currency or cryptocurrency is called ‘coin’. They can either be derived from Bitcoin or from alternative blockchains. They all share some basic features and similar use cases.

A Visual Organization of Coins, Tokens, and Altcoins
Source: https://blog.citowise.com/the-basics-coin-vs-token-what-is-the-difference-5cd270591538

Some common properties of all coins are:

• Capped: There is a limited supply of coins available at any given point of time
• Encrypted: The underlying technology is blockchain and coins are encrypted in complex mathematical logic
• Fungible: One unit is equivalent (though not equal) to the other
• Divisible: Each unit coin can be divided into smaller units or denominations
• Acceptable: Most coins are accepted widely as a store of wealth or medium of transfer
• Portable: Though not having any physical entity, coin ownership can be transferred
• Durable: All coins can be exchanged and transferred innumerable times without depreciating their value
  
  Listing of coins at CoinMarketCap

‘Coins’ is just an abbreviation for cryptocurrency coins. Some of them use Bitcoin’s code base with variations that make them suitable for different use cases and applications. Some like Ethereum are not based on Bitcoin’s code base or protocol. Rather, they have their own protocol and platform. Just check https://coinmarketcap.com for a complete list of coins and their platforms.

What is a Token?

A token differs from a coin or altcoin. It is not only a store of value and a protocol to validate transactions, but also a source of funds to manage the operating expenses of the platform. Tokens require a dedicated platform such as Omni or Ethereum to operate.

Lines become blurred when we are talking of coins and tokens. The two terms are casually used interchangeably. But strictly speaking, there are quite a few differences.

Coins are like currency. They are supposed to act as a store of value and a medium of transaction. Tokens on the other hand have a wider connotation. Tokens do possess value but they cannot be considered just currency. They are created by users using core coins in blockchain development like Ethereum or Waves 2.0 protocols.

Tokens deliver value over and above speculative returns. This typically happens through buybacks. Tokens can be used for influencing business decisions or strategic decisions to the platform.

Listing of tokens at CoinMarketCap

 

Are There any Similarities Between Tokens and Coins?

Tokens are any commodity that is fungible and tradable and offers its owner special privileges. They are hosted by blockchains such as Ethereum. Often, tokens are distributed and created using Initial Coin Offerings (ICO) but there are many alterative platforms where tokens can be generated. Presently, CoinMarketCap lists about 590 tokens.

In short, coins exyist independently of any platform. They are like standalone currencies. Tokens, on the other hand, are built on a platform and can exist only there.

To sum up…

Blockchain and cryptocurrency enthusiasts would find it useful to access CoinMarketCap for a latest listing of coins and tokens in the market. It’s best to gain complete understanding of these technical terms before diving deep into crypto world.