ADVERTISEMENT

The difference between a cryptocurrency coin and a protocol token

ADVERTISEMENT

Must Read

Is Bitcoin going to crash hard at Bakkt launch in 2 days?

Bakkt announced to launch their digital assets product-Bakkt Warehouse, a platform that will act a custody place for the...

Report: Crypto wash trading reduced by 35%

In the data reports shown by Blockchain Transparency Institute, it was seen that the global wash trading among top...

Wall Street Banks posing a threat to crypto space says Anthony Pompliano

Ever since the announcement of Facebook's coin, Libra, it has been a topic of discussion by the people as...

The two most often confused and interchangeably used terms, crypto coins, and tokens explained

 

The blockchain technology has unexpectedly spurred a lot of other new fields. The cryptocurrencies being one of the first mainstream adoptions of the blockchain technology there are a few other concepts within the industry which apply the blockchain technology. For an instance, the protocol tokens are different from the cryptocurrencies, but both of them apply to Blockchain Technology itself. Let us try to understand the basic characteristics which differentiate a cryptocurrency coin from a protocol token.

Both of them are most often regarded or assumed as being circulated as a currency but actually, it is not the case. Bitcoin is regarded as a currency because it is a medium of exchange and a store of value. But due to the high momentum, all the tokens, as well as the coins, were termed as cryptocurrencies, which is not correct.  They incorporate completely separate ways of cryptography. This confusion can be a great disaster for the newcomers in the field.

 

Cryptocurrency coin

Cryptocurrency coins are just a digital version of the Fiat currencies that we use on a day to day basis. Bitcoin is one of the best examples of a cryptocurrency coin. The transactions that take place using Bitcoin are stored on an immutable ledger which is distributed throughout the network for verification and transparency. The Blockchain network reduces fraud and increases transparency.  There are a number of other cryptocurrencies which are created on the original Bitcoin protocol, proposed by the anonymous group of people named, Satoshi Nakamoto like Litecoin, Namecoin, etc. There also cryptocurrencies like Ripple and Monero which are developed on their own separate blockchain protocol. Each and every cryptocurrency coin needs to have some basic characteristic features to qualify itself as a coin, They are as follows.

The coin should be

  • Fungible
  • Divisible
  • Acceptable
  • Portable
  • have a Limited supply.

The cryptocurrency coins can be sent, received, and can also be mined. They can, in no circumstances, act differently from a currency.

 

Tokens

Cryptocurrency token is very similar to the cryptocurrency coin but a token can be used as a part of an ecosystem. A token gives the owner, the right to participate, in that particular network. The functionalities of a token are unlimited and their existence only seems to be valid inside a particular ecosystem, outside of which they become null and void. A token might be used to represent a company’s share, give access to the project’s functionalities, or used as a digital asset. With every launch of a new project, a new functionality of the token is unraveled.

One of the most real-life examples of a token is a ticket for a particular concert. The ticket is valid only within the premises of the concert and sometimes may be valid at other designated restaurants and places. Security tokens, as well as utility tokens, are the two types of tokens which are available in cryptocurrency market. Security tokens are mostly considered to be a security while representing the share of the company, but the utility tokens find its application outside the ecosystem also.

Creation of a particular coin is a cumbersome process as the user needs to have a vast amount of knowledge about the Blockchain Technology. On the other hand, the creation of tokens doesn’t require that much information, one can use a standard template provided by some of the most successful Blockchain platforms. The Ethereum network provides the best service in this matter where the creation of tokens can seamlessly be undertaken by following a few simple steps.

 

Conclusion

A cryptocurrency coin can just be used as a transfer of value but a token can represent a company’s share within that ecosystem. A token might be necessary to access particular financial services that the blockchain network provides. Similarly, cryptocurrency coin can be used to buy or sell goods or services. Interestingly, it is to be noted that tokens can be bought with the help of cryptocurrency coins, but the coins cannot be bought by using tokens. Now, as one has understood the basic difference between a cryptocurrency coin and token it would become easier for them not to get misguided or misled in the cryptocurrency world.

Disclaimer: Coinnounce's views are not necessarily reflected in the articles published, and they are the sole representation of the author's opinions. Article's information should not be taken as investment advice. Risks are involved in cryptocurrency investments and trading. Readers are urged to carry out extensive research before making a decision.

4 comments

  1. Protocol token is shaken as of now because of the disappearance of the rule of law dirty powerful media outlets for the love of money and the fear from the opposition left party that the media is a major player in it when my words on tweeter and other media outlets started to form major threats especially to previous president Obama,the Clinton,C N N & and the hole gang of the one world government advocates.I was threatened publicly on tweeter,hacked severely invading my privacy my network cellphones emails ext followed by several cars then physical treat by two persons and a trained black dog was released on me to scare me then I was attached and hurt seriously and my car back window was broken and my Android cellphone was taken even I feel cell providers are assisting as well and finally my network was completely cleaned up from tokens and was transferred to P pumapay total supply 78042956829 Tokens raised $117019041…it’s has been for couple of years struggling knowing that money was collected because of the unlimited leads generated by my network using closed bank accounts lost cellphone numbers assistance by some google affiliates group and more this is the end of it where is the rule of law??? I want the federal bureau of investigations to open investigations to investigate everything before its to late …
    Thanks

  2. […] The newcomers in the cryptocurrency field, on observing a large number of cryptocurrencies, apart from Bitcoin would get intimidated and hence would be in a confusion that why do so many cryptocurrencies exist, apart from Bitcoin, NEM being one of them? Being naive in the subject and not having much exposure to so many different cryptocurrencies, they miserably fail in trading due to the ambiguity. The feeling is highly daunting when one is extensively used to the Fiat currencies. One of the most prominent reasons that can be predicted for such a scenario is the open source nature of the cryptocurrency projects. It is has become easier for people to make modifications in the existing code according to their requirements and there you get a brand new cryptocurrency coin. […]

Leave a reply

Please enter your comment!
Please enter your name here

Latest News

Is Bitcoin going to crash hard at Bakkt launch in 2 days?

Bakkt announced to launch their digital assets product-Bakkt Warehouse, a platform that will act a custody place for the...

More Articles Like This