Crypto token and coin are not the same things
What is Crypto Coin
- Crypto Coins is an asset that is native to their own Blockchain. For example, BTC, LTC, and ETH
- Each of these coins exists in their own blockchain
- Bitcoin operates some functions on the bitcoin blockchain
- Etherium operate some function on the Ethereum blockchain
- Neo operates some functions on the Neo blockchain.
What is a Crypto token
- Tokens often get called digital coins that are created on existing blockchain
- The most common token platform is Ethereum
- Tokens have been built on another blockchain.
Differences between token Vs coin
Coin: A coin uses its own blockchain to keep track of the data. Ethereum is its own blockchain about stores value and validates transactions. Etherium teams have been working hard over the years and providing their systems, updating how it works.
Token: Token uses someone else coins blockchain. Ethereum token or Erc-20 token uses Ethereum blockchain capabilities as its backbone and infrastructure. For example, a Basic Attention Token is an Erc-20 token built on the Ethereum network. Basic Attention Tokens rely on the Ethereum blockchain network to keep their product state.
- One of the important things is one cannot birth a token straight into a coin. You can create a coin function as a way to include a Bridge that allows users to swap up their previous tokens for new coins.
- In some cases, some coins like are tokens in multiple networks. For example, LEO is on the Ethereum network, Binance smart chain Network, and the Hive network also.
- Another important things are some coins represents as a token on other networks. For example, video some days ago I buy some Binance peg Ethereum tokens in Binance smart chain network. I did not actually buy Ethereum, I bought representations of Ethereum on the Binance smart chain network. You may be wondering why I did this? it is causing regular Ethereum transaction fees to be around $20. However, a transaction in Binance smart chain network is only 50 cents. So it is more affordable to trade a representation of Ethereum on the Binance smart chain network.
What are tokens and coins used for?
Platform token: This is created to support the decentralized application on the blockchain. For example, Uniswap is the one of platforms’ tokens, Uniswap is a decentralized application that allows users to swap up Ethereum tokens for other Ethereum tokens. Even though they are a decentralized app and also have their own token Uniswap token. This token is given out to those to invest in their platform. The promise is that eventually the token holders can vote on changes in the future and maybe earn some profit from the trade.
Security token: Security tokens are minted to represent ownership of another asset. For example, say you wanted to buy a bar of gold and want to hold the gold, you can create a token that is back to the price of gold, so instead of actually owning the gold you only representation of it. You wanted to buy gold which is technically much safer, it is much more difficult to hack an Ethereum token than in someone’s house. The tricky part is that there are should be a real asset behind it, for example, I created a gold token asking to invest in it and not have any gold.
It is used as a fast and easy way to transfer money. The expenses are super low, a transaction fee is 0.000021 US Dollars which is ridiculous. That means you can pay fees of 47000 transactions only can one $1, try to be Paypal or wire transfer ha ha…
Utility token: It has value to their ownership. For example, a Basic Attention token is an Ethereum token that may be used to put it on the market at the brave browser. If I want to advertise on YouTube on the brave browser, I can easily use the Basic attention token. Utility tokens can be used as commercial intent.
Governance token: It allows the token holders to vote on certain things. For example, Uniswap can be a governance token in the next version of the Uniswap exchange. You have more voting power when you have more tokens.