3 Differences Between Token and Coin
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Living in the 21st century, everyone has heard, at least once in her or his lifetime, the following concepts: token, coin, bitcoin and cryptocurrency.
For most of us, the meanings of the above-mentioned concepts still remain a mystery.
Have you ever wondered what cryptocurrency is? Have you ever thought about the reason why the terms bitcoin and cryptocurrency are often used together? And finally, have you ever wondered what the difference between token and coin is?
Unless you are an economics maniac who reads the latest news every day and who is up to date with all the changes and moves in the world of finance and economics, I am pretty sure that the answers to the asked questions would be negative.
To discuss the differences between token and coin, those concepts must be defined first. It is really worthy, though, to explain what cryptocurrency is, taking into consideration that people consider both tokens as well as coins to be cryptocurrencies.
Cryptocurrency is easily associated with two terms, currency and cryptography, that is coding. Logically thinking then, cryptocurrency refers to the encrypted currency. An example of cryptocurrency would be bitcoin.
As it has been already mentioned, people treat both tokens as well as coins as if they were the subgroup of cryptocurrency. Instead of finding the difference between tokens and coins, we have found the property they have in common. Tokens and coins are cryptocurrencies. The coins that are considered to be cryptocurrencies are called Altcoins. It stands for Alternative Cryptocurrency Coins. Altcoins are mostly the alternatives of Bitcoins.
- The language and comprehension difficulties.
Nowadays, when the number of new phenomena and concepts is growing, it is really difficult to define the words deeply and correctly. Most of them are defined very perfunctorily. This is the reason why a large number of people do not understand them properly but only “more or less.” This is why, for example, people think that tokens and coins are cryptocurrencies without providing any specific differences and without distinguishing them. Two words that are similar but not the same are used interchangeably.
Furthermore, understanding some concepts, such as cryptocurrency, requires a special way of thinking. The concept may seem to be abstract for people who are very practical, and who are not able to imagine the encrypted currency. This is the reason why they may not understand certain terms at all, understand them in a bad way or they may not see the difference between two similar words that actually exist.
- The form and function difference
The next difference between tokens and coins is visible in their form and function. The function of coins is really basic. It is understood as the means of payment.
The function of tokens, though, is more complex. It is treated as if it was money but with fuel. Its functionality is much more sophisticated than the one of coins.
Furthermore, tokens may be seen as coins but coins cannot be seen as tokens. It is visible very easily that tokens are more complex, more sophisticated and stay in a higher position in the “coins vs. tokens competition”. Even if they are very similar, their form and functionality are something that allows the readers who are not necessarily economics maniacs to understand the importance of tokens. One of the functions of tokens is delivering value, for example to investors.
- The very thin line between tokens and coins
As you may have noticed the line between tokens and coins is very thin. One is almost on the border of the other one and vice versa. Without any particular knowledge of economics, the concepts may be considered as the same or may be misunderstood. Since they both are related to the same field, they require more details to be understood completely. Even if there is no rule, a lot of people understand coin as cash while token is seen as everything else.
Two so similar words, being almost synonyms, are used to describe two different phenomena. People should be careful with using them without complete comprehension.
By Justyna Jacek