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Token Vs Coin - A side by side comparison

Crypto Token Vs Coin

Crypto market has boomed in 2017 and kind of doomed in the first half of the 2018 year (It may pick up in later half). A lot of people invest and trade in cryptos but often get confused among crypto tokens and crypto coins. This article tries to compare crypto tokens Vs crypto coins by listing their differences in a side-by-side manner.

What is cryptocurrency?

Before looking into the differences lets understand what we mean by cryptocurrency. As per Wikipedia, the definition of currency is,

"A currency in the most specific use of the word refers to money in any form when in actual use or circulation as a medium of exchange, especially circulating banknotes and coins."

A cryptocurrency is a digital form based on strong cryptographic algorithms that can serve as a medium of exchange. However, it is not recognized as currency by most of the Governments on our planet. Bitcoin is the firstborn peer-to-peer cryptocurrency and sole source of the popularity of crypto space. The underlying mechanism that makes bitcoin special is peer-to-peer Blockchain Technology.
10 Things You Should Know About Blockchain
Though cryptocurrency has all characteristics of regular fiat currency, until officially recognized as currency by Governmental authorities, it is safe to call all digital cryptos as Digital Assets.

As of writing this article, CoinMarketCap, an independent portal that tracks market capitalization of crypto space lists 1599 cryptos with 45% still dominated by Bitcoin.

Snip from https://coinmarketcap.com

The Key Differences

In above chart, many cryptos are listed along with Bitcoin and we can take it forward from here.
The basic classification is Altcoins aka Coins and Tokens. Every other crypto other than bitcoin is generally referred as AltCoin. Though most of the times the relation between crypto tokens and coins is complex and overlapping, we will try to simplify the distinguishing factors using some examples.

Sr. No.
Token
Coin
1.
Tokens issued generally on top of underlying blockchain platform.
Majority of altcoins are derived from Bitcoin’s open-sourced code with the addition of new functionality. Generally, have their own separate blockchain.

2.
Such as Ethereum, NxT etc.
e.g. Bitcoin, Ethereum, Ripple, Nxt, Neo etc.
3.
DigixDAO project has two tokens, DGX and DGD on Ethereum platform.
Ethereum’s ETH token is a single token on blockchain while NEO blockchain has two different tokens viz. NEO and GAS
4.
Tokens generally do not have their own blockchain
Coins do have their own blockchain
5.
Tokens primarily used to denote a utility or asset.
e.g. DigixDAO’s every DGX token represent 1 gram of Gold. And DGD token is freely traded on exchanges

Coins such ETH (ether) are native coins to the underlying Ethereum platform. Every transaction is paid in terms of ether to the miners of the transaction.
6.
Tokens are also tradable on different crypto exchanges.
e.g. DGD is tradable token
Coins are tradable on different crypto exchanges.
e.g. ETH is also tradable along with DGD and both have prices independent of each other.

On top of it, if you want to quickly find out if your crypto is indeed a token or coin then below is a quick tip. Use coinmarketcapital.com. Below are the snips from the CoinMarketCap to show DGD, ETH and how these cryptos are marked.

Snip from http://CoinMarketCap.com                           
Snips from http://CoinMarketCap.com

Also, there are many ICO (Initial Coin Offerings) in the market to raise capital for different creative projects. Each ICO tries to sell their fixed number of tokens to initial investors and raise funds for them. 
Know more about ICO,
Most of the ICOs are running on top of Ethereum blockchain. You can track list of coins on Ethereum on etherdelta.com, a decentralized exchange on top of Ethereum.

Feel free to comment your views, we would love to hear from you.

In next article, we will cover ICO vs IPO and how they compare with each other.


PC:pablo,pixabay


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Mandar Pise Opinions expressed by techsutram contributors are their own.

Mandar is a seasoned software professional & Fintech, Cloud, IoT, and Blockchain enthusiast. He writes to benefit others from his experiences. His overall goal is to help people learn about Fintech, Cloud, IoT, AI and Blockchain, and the effects they will have economically and socially in the future.

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