THE BASICS: COIN vs TOKEN. WHAT IS THE DIFFERENCE?

Let’s begin with the definition of cryptocurrencies. Cryptocurrencies are digital or virtual currencies that are encrypted (secured) using cryptography. Cryptography refers to the use of encryption techniques to secure and verify the transfer of transactions.Bitcoin represents the first decentralized cryptocurrency, which is powered by a public ledger that records and validates all transactions chronologically, called the Blockchain.

The creation of Bitcoin initiated explosion of a diverse ecosystem of other coins and tokens, that are often regarded as cryptocurrencies in general. As of today there are 1916 (06.09.2018) cryptocurrencies according to the data available on https://coinmarketcap.com/ website as well.

The most common categorization of cryptocurrencies are:

(EMCO coming soon)

1. Alternative Cryptocurrency Coins (Altcoins)

2. Tokens

COIN

Coin, for instance Bitcoin, is a crytocurrency type which operates independently of any other platform. In other words a coin has its own platform which is called blockchain. There is no difference between a coin and a cryptocoin or altcoin; coin is just an abbreviation of cryptocoin. Altcoins simply refers to coins that are an alternative to Bitcoin. The majority of altcoins are variants of Bitcoin, built using Bitcoin’s open-sourced, original platform with changes to its underlying codes, therefore creating a brand new coin with a different set of features.

Examples of altcoins; Namecoin, Peercoin, Litecoin, Dogecoin and Auroracoin . There are other altcoins that aren’t derived from Bitcoin’s open-source protocol. Rather, they have created their own Blockchain and protocol that supports their native currency. For example; Ethereum, Ripple, Omni, Nxt, Waves and Counterparty.

But how can you identify if a coin has its own platform or not ?

It is easy; if you check the https://coinmarketcap.com/, you can see whole list of coins along with their applicable platforms at all.

TOKEN

Tokens require another platform such as Ethereum or Omni to exist and operate. First, tokens provide a way not only to define a protocol, but to fund the operating expenses required to host it as a service. Bitcoin and Ethereum have tens of thousands of servers around the world (“miners”) that run their networks. They cover the hosting costs with built-in mechanisms that automatically distribute token rewards to computers on the network (“mining rewards”).

Second, tokens provide a model for creating shared computing resources (including databases, compute, and file storage) while keeping the control of those resources decentralized (and without requiring an organization to maintain them). This is the blockchain technology which allows shared datas to be stored on a decentralized network.

Crypto Tokens are created over an Initial Coin Offering (ICO).

It is smilar to an Initial Public Offering(IPO) for stocks. Projects launch an ICOby issuing crypto-tokens on the blockchain (usually the Bitcoin or the Ethereum blockchain), giving early investors the chance to acquire tokens in exchange for cryptocurrency. ICOs are usually limited by time or a capital on the amount of funds raised. The value and number of tokens released can be static or calculated based on the amount of funds raised.

TYPES OF TOKEN

So what kinds of token are there? And how do they differ?

A token can fulfil either one, or several of the following functions:

• A currency, used as a payment system between participants

• A digital asset (a digital right)

• A means for accounting (number of API-calls, volume of torrent uploads)

• A share (stake) in a specific start-up

• A way of preventing attacks (such as commission within the bitcoin network)

• Payment for using a system