Difference between Tokens and Cryptocurrencies

Internet access and the market launch of multiple devices and applications have created the conditions to consolidate and expand the ecosystem of the digital economy, in this aspect the blockchain technology has generated a turning point in the system, transforming economic relations between the agents. The blockchain has introduced a series of elements within this ecosystem such as cryptocurrencies and Tokens.

One of the concerns of people who are starting in this blockchain world is: are the cryptocurrency and Tokens synonymous? The answer is NO! The main features of Tokens and cryptocurrencies are explained in the following sections.

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Cryptocurrencies

The term cryptocurrency, we quickly associate it with Bitcoin, a digital currency that is sustained in a distributed data network, and that quickly gained confidence within the community, due to the impossibility of falsifying said currency, this because each transaction is registered in a distributed network, in an open, transparent accounting book.
The cryptocurrencies comply with the three basic functions that characterize money, such as:

• Means of payment: cryptocurrencies allow peer-to-peer transactions, are used as a form of payment to acquire a good or service.
• Value reserve: a person can keep their money in a cryptocurrency, as a way to protect their purchasing power.
• Unit of account: the value of goods and services can be expressed in this type of digital currency, for example Bitcoin (BTC), Dash (DSH), Litecoin (LTC)

Token something more than a cryptocurrency

In the network there is a lot of information about cryptocurrencies and sometimes the term Token has to be used as a synonym of cryptocurrencies, commenting on a mistake.

A Token in addition to having the functions of a cryptocurrency as a unit of value, means of payment also has infinity of functionalities that has encouraged the creation of a variety of services and products.

In other words, a Token is a unit of value that uses the blockchain protocol of a third party. It serves as a backup or to exercise rights over the ownership or use of a product.

The Token are created only to be used within a closed environment, that is, within the ecosystem developed by a startup or company to carry out their project. An example outside the digital world are casino chips that can only be used within the casino, or tokens from amusement parks or theme parks.

Types of Tokens

Tokens can be classified according to their purpose:

• Tokens Coins: they have the functions of a cryptocurrency, that is, they will serve as means of payment.
• Investment Tokens: they are created to capture economic resources and thus finance the project or startup, they are also known as Token of ICO.
• Token of values: represents the right that the owner can exercise on a project, this token has a wall role to the actions of a company.
• Token reward: can only be used within the platform where they are created and serves to reward or give a reward to the user for performing a certain activity.

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Examples of tokens

• Ether, is the native token that can only be used in the Ethereum blockchain platform. The Ether fulfills the functions of a cryptocurrency and also serves as a unit of account to estimate the value of the computational resources required to maintain the platform and perform the operations.
• Steem, a reward token that pays content creators, people who upload content to your page.
• Minds is a kind of social network, which uses Token ERC-20 to reward its users for performing various activities.
• Siacoins is a cryptocurrency that is only used to pay for data storage services in the Sia cloud, hence it is considered a token, it can only be used within the ecosystem designed by that company.