"Coin vs Token: Understanding the Differences"

larapambuan (63)mutedin Steem Alliance • 2 years ago

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Did you know that the first coin and token were created way back in 2009? Bitcoin and Mastercoin were both created, with Bitcoin being the first decentralized coin and Mastercoin being the first token on top of the Bitcoin blockchain.

Nowadays, coins and tokens have become a hot topic in the world of cryptocurrency. But what exactly is the difference between the two?

A coin, like Bitcoin or Litecoin, is its own independent blockchain. This means that it has its own set of rules, its own method of verifying transactions, and its own unique ecosystem. These types of coins are often used as a form of currency, and can be bought and sold on various exchanges.

A token, on the other hand, is constructed on top of an already-existing blockchain. This means that it uses the infrastructure of another blockchain, like Ethereum, to function. These tokens can represent all sorts of things, from digital assets like art or real estate, to virtual shares in a company.

One way to think about it is that a coin is like a standalone car, and a token is like a car that runs on top of another car, like a train. The train has its own rules and ways of doing things, but the cars on top of it can have different functions, like carrying passengers or cargo.

This is important to know because it affects the way that the coin or token can be used. Coins can be used as a form of currency or as a store of value, while tokens can be used for all sorts of things like representing assets, utility tokens that allow access to a certain product or service, or even being used as rewards in loyalty programs.

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One example of a token that is built on top of the Ethereum blockchain is ERC-20 tokens. These tokens follow a specific set of rules and standards, and can represent anything from a digital collectible to a virtual share in a company.

So, the next time you hear about a new coin or token, think about whether it's its own independent blockchain or if it's built on top of another one. Understanding the difference can help you make better decisions about what to do with your cryptocurrency investments.