The crypto world has its own terminology and its own slang. The words coin vs token mean different types of cryptoassets, but are often used synonymously.
Of course, no one will ridicule or arrest you if you call a token a coin or vice versa, because even industry experts say so. However, understanding the difference between coin vs token is really necessary if you plan to invest in digital assets.
What Is a Cryptocoin
Coins are cryptocurrencies created on their own blockchain. They are also called the “native tokens” of the blockchain. Coins are used to pay commissions for platform services, in particular, for transactions when creating their own applications on the blockchain.
Building a blockchain is very expensive. Huge resources, material and non-material, must be invested in its creation. Launching a coin is long, expensive, troublesome, and not everyone can do it.
What Is Token
Technologically, a token is the same coin, but these digital assets do not have their own blockchains. They are launched on the basis of existing blockchains, where they peacefully coexist with their own network tokens and tokens of other projects.
It is really very simple to create a token, even an inquisitive teenager can do it, especially since automated tools already exist for this purpose. However, if the project turns out to be successful, actively develops, launches its own blockchain and transfers its asset to it, it becomes a coin.
There have already been such precedents, and the history of Binance Coin can be considered the most striking. It was originally a Binance Smart Chain token
(BNB) launched on the Ethereum blockchain in 2017. In 2018, the Binance exchange launched its own Binance Chain blockchain and transferred its token to it.
What Is the Difference Between Coins and Tokens
We will shortlist the differences between different crypto assets:
- Coins are created on their own blockchain, and tokens are created on an existing system.
- Issuing a coin is more costly and time-consuming, you can create a token quickly and without super-efforts.
- Digital coins are primarily a means of payment, and tokens can perform other functions as well.
- Coins are distributed through mining, tokens have gained popularity through ICOs.
What Assets Is It Better to Invest In?
When choosing a cryptocurrency investment strategy and assets to form an investment portfolio, you will definitely think about how best to act.
The cryptocurrency market is a new phenomenon. Therefore, all cryptocurrencies are high-risk assets. However, the degrees of risk vary greatly. Having our own blockchain gives reason to consider coins more reliable and consider them as a tool for long-term investment.
New tokens are created almost every day, but the goals of their creators and the actual fate of the assets themselves are very different. Some of them, in particular Dogecoin (DOGE), were originally created as a joke, and the creators did not hide it. The DOGE success story clearly shows that everything is really possible in the cryptocurrency market.
The joke of the Dogecoin creators was supported by Elon Musk and thereby attracted the attention of investors to the asset. The attention of investors motivated the creators to further develop the project and it is quite possible that in the foreseeable future we will see an independent Doge Chain. However, the price of Doge and the fate of the project largely depend on the mood and location of Elon Musk.
Tokens are more suitable for short-term and very short-term investments. Whatever strategy you choose and in whatever crypto assets you invest, remember the main investor rules:
- Make decisions based on your own market research;
- Invest only the amount that you are not afraid to lose irretrievably;
- Diversify your risks.
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Cryptocurrency is complete freedom of choice and action. But complete freedom of action always means full responsibility for their consequences.