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The Difference Between Cryptocurrency Tokens and Coins

Millennial Magazine - tokens and coins

Cryptocurrency comes with a whole lot of specific jargon that is used, and it can easily throw off someone who is new to the world of this digital exchange. There are the various types of platforms, coins, and tokens that each have a specific purpose, but what do they all mean?

We have compiled a list of the different tokens and coins, along with their explanations so that you have a better position in investing. Before you start buying coins or trading on apps visit, It is always better to be informed than ignorantly buying into something unwittingly.

The Difference Between Tokens and Coins

Someone may have told you once that a crypto token is the same as a coin. This is not the case. A crypto coin might act as a token, but it is not the same for a token.

If you want to work out which one you need, you should first look at what your plans are with cryptocurrency. Fundamentally, tokens and coins are the same because they facilitate transactions and carry a certain value.

Crypto Coins

Bitcoin created the standard coin when it was first developed, as it was the only coin available. Since then, a bunch has added themselves to the network of crypto platforms. There are various traits that help to determine a crypto coin.

The first is that a coin is generally made to work with a specific platform that is managed by a blockchain, which keeps a record of every single transaction made within that platform. A great example would be the native coin to the crypto platform, Ether is known as Ethereum.

If you were to pay someone who uses Ethereum in Bitcoin, the transaction will be recorded on the Bitcoin blockchain, whereas any transactions made with Ethereum will be recorded on the Ether blockchain.

Crypto coins are very similar to an actual coin of fiat currency because it was designed as the substitute. You can use these coins to buy many different things. Sites like Amazon and Microsoft may soon except Bitcoin and other cryptocurrencies as payment.

Crypto Tokens

Essentially, crypto tokens function within a blockchain that was developed for a specific cryptocurrency. By keeping with our Ethereum example, the most used tokens in this platform are Tether, BAT, stablecoins, and BNT.

Where a transaction with a crypto coin is recorded on a blockchain, a smart contract is what the transactions with tokens depend on.

The key characteristic of a token is the fact that each token is unique, so when they are exchanged the previous owner must manually do so. It then moves from one account to the other, physically. This differs from crypto coins which do not move physically, but the available amount in the account changes – much like when you wire someone cash with your fiat currency.

A crypto coin will represent a monetary value for it is used as a substitute for fiat currencies, and a token will represent your assets. This means if you buy shares of a company, they will send you a token that will represent the shares you purchased. This is all transacted through the blockchain of the platform they used and recorded just like crypto coins.

What is a Token Swap?

A token swap is what you call the transaction of different crypto tokens that are being exchanged on other blockchains where that token is not native. There are many tokens that are unable to be exchanged on some platforms, making them less popular because investors are required to first exchange the token into fiat currency.

Other platforms have allowed the exchange between cryptocurrencies without exchanging the money into fiat currencies first. This will save you the fees of exchanging the currency. Keep an eye out for Airswap or Metamask as viable platforms that allow token swaps.

What do you think?

Written by JD Hysen

JD Hysen is a fin-tech writer and music critic for Millennial Magazine. As host of The TrueMan Show, he covers all things related to stocks, tech and culture. He's a market analyst by day and a music scout by night, combing venues in search of fresh acts and noteworthy performances.

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