May 28, 2022


Bitcoin & Tech news

Differences between tokens, coins and digital currencies

tokens coins digital currencies
Read Time:4 Minute, 22 Second

Indeed, there are discrepancies between all these terms, both major and minor. Indeed, when JPMorgan Chase launched its JPM Coin, it presented it as a “digital currency”, while Facebook’s Libra presented itself as a solid crypto, ironically, that could be part of the reason that regulators around the world are They got so “nervous” with this last one.

However, although JPM Coin and Libra are different by design, in both cases decentralization experts were quick to dismiss them as “cryptocurrencies”, but rather as “virtual money” or “digital currencies”, basically because they are managed by companies and, therefore, they are centralized. Unfortunately, it is not that simple: although decentralized management is one of the main ideologies of crypto, some of them may be centralized, at least in some details.

Thus, a crypto is a digital or virtual currency (the details are discussed later in the article), which is built with strong cryptography, which makes it highly secure and immutable. These assets are supported by blockchain technology, it is a digital “accounting book”, but totally disaggregated through the computer network.

On the other hand, cryptos without blockchain are also technically possible; in fact, Digicash, one of the first forms of cryptographic electronic payments (launched in the early 1990s), did not have such associated technology.
To further complicate matters, there are subcategories within the sector. NEO stands out, which is a coin, but in the case of BNB it is actually a token. As described, there is a lot of confusion surrounding these terms for those new to the industry. To learn more about cryptocurrency trading and start trading, sign up to the Crypto Genius website.

What is a crypto?

These are digital currencies that originate from their network and technology base. Bitcoin (BTC), Monero (XMR) and Ether (ETH) are some cryptos, but what do they have in common? They all exist in their own trade logs (they work independently). Indeed, BTC operates on its native network, ETH does the same with its development, as well as XMR. All of them have the possibility of being sent, received or mined.

According to their name, cryptos tend to have certain “similarities” with money: fungible, ability to be subdivided into small parts, easy to move and transport, as well as limited supply. Thus, crypto has typically been created to be used like “physical money” (paying for goods and services), though mass adoption has been slow.

However, there are exceptions. While it is true that ETH has the attributes of a currency, it works beyond that “traditional” role, because it is used within a chain network to facilitate operations.

On the other hand, there are the so-called “altcoins”, which have earned this title because they resemble an alternative to the first crypto. Many altcoins are an “offshoot” of this and were developed using the same protocol (notably LTC and DOGE among them), despite being built on entirely new networks. In fact, some experts claim that the future of the sector lies in altcoins.

Therefore, the following question must be applied when defining an altcoin: Is it a crypto that has its own network, but is not BTC (that is, it is not the original chain)? If the answer is yes, we are talking about altcoin.

What is a token?

They are digital assets and have been created with various applications within the cryptographic environment for a specific purpose.
By establishing disparity between tokens and coins, we can find that the former require a chain technology base to work. Ethereum is widely used for this purpose, especially thanks to its availability of “Smart Contracts”. Those that are created in this network are usually known as ERC-20, in fact, USDT is among the most popular in the sector. There are, of course, other means for tokens, such as NEO or Waves, coexisting.

The purpose of tokens is also different from that of coins, although some are used as a disbursement alternative. In addition, they have come up with “security features,” which basically represent one’s wager on a purpose. Although they take value from the startup behind the project, they do not give the incumbent actual ownership of that new company.

People buy them solely with the idea that their value will increase in the future; that’s what the whole boom in initial coin offerings was about. However, when people bought security tokens disguised as utility tokens. Securities are typically subject to close regulatory scrutiny and have stringent validation policies, which was not the case in the ICO market.

What discrepancy is there?

En realidad, esto es mucho más sencillo que todo el asunto sobre tokens/monedas. Las “digitales” es una expresión general que se utiliza para referir todas las formas de fondos electrónicos, ya sea con una “representación virtual” o cripto (aunque no son exactamente lo mismo). 

La característica que define a las “digitales” se relaciona con su existencia en forma electrónica, pero en contraste con un billete de euro o una moneda, cuentan con una cualidad intangible. Es decir, solo se poseen y gastan de forma “on-line” mediante el uso de monederos electrónicos y opciones particulares. Normalmente, no tienen una gestión centralizada y esta condición les facilita operaciones de proceso rápido con recargos muy bajos.