The difference between a token and a coin

I often get the question from beginners: "What is the difference between a token and a coin?" With the current variety of cryptocurrencies and ongoing ICOs, you can not always understand how a coin differs from a token, because their values and use are significantly overlapping. However, these two concepts have significant differences.

The most popular coin is Bitcoin, which is based on its own blockchain.

Alternative coins are called altcoins or simply coins. Most altcoins are options (fork) of Bitcoin, built on the Bitcoin source, but have changes in its base code. Examples of altcoins that are derived from Bitcoin: Namecoin, Peercoin, Litecoin, Dogecoin, Bitcoin Cash.

There are some altcoins that were not obtained in the last version of Bitcoin source modification. In this case, the developers have created their own blockchain and protocol, which supports their own coin. For example, Ethereum, Ripple, Omni, Nxt and Waves.

Coin characteristics:

One unit is equivalent to the others
Can be divided into smaller units of value
Widely accepted as a means of exchange
Limited edition
Has its own blockchain

A token can transfer smart contracts that can be used in the corresponding DApp to accomplish a specific goal.

In order to create a token, it is enough to use the standard blockchain template, for example, to use the Ethereum platform, which allows you to create your own tokens.

Sometimes a token can be a hybrid - it can be a stock, an internal currency, and a unit of account.

In addition, such coins as Ethereum can exist independently, but tokens like GNT can not exist without the Ethereum infrastructure.

A token can perform one or more of the following functions:

Confirm the right to own the asset;
Confirm the shares in the startup;
Be a unit of account;
Be means of mutual settlement between participants;
Be a reward for players;
Be means of attacks prevention;
Be means of payment for using the system.

The main difference between coins and tokens is in their structure: coins are separate currencies with their own blockchain, while tokens do not require their own blockchain, which facilitates the creation of decentralized applications. The main purpose of the coin is to fulfill the role of money: to be determined by calculations, a store of value and official transfers. Tokens offer functionality, surpassing digital money. They can be used to vote on key business decisions or even technical changes on the platform.

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