OPEN DEBATE: Cryptocurrencies COINS VS TOKENS
The purpose of this article is to make YOU in the COMMENTS debate whether you think there are more opportunities to using coins or tokens. Now before we do that most of you are probably not experts on what these two are or probably won’t know what are some advantages and disadvantages of each. I understand that cryptocurrencies can be really hard to wrap our heads around specially since their underlying technology, the Blockchain, is not easy to explain if not by using technical terminology that is only simple for those who are familiar with computing language. Nevertheless, I will try to make a nonbiased explanation of each term and will let you comment on what you think will have more applications in the future or that we will see this 2018.
Quick Reminder: What are cryptocurrencies?
Cryptocurrencies are a form of digital coin that is encrypted using cryptography, in other words using encryption techniques to verify and secure the transfer of transactions. The most famous one as of now is Bitcoin. Other cryptocurrencies have existed before it however this was the first one to be decentralized and that used Blockchain Technology.
Let’s get to it then. Firstly, it is it important to know that not all tokens and coins are cryptocurrencies. In fact, the definition of currency which is amongst the lines of a unit of account, a store of value and a medium of change is not valid for many assets we call cryptocurrencies but since we’ve already gotten used to it I guess there is no way back.
Coins or Altcoins (Alternative Cryptocurrency Coins)
Alternative from what? Bitcoin mainly, the name comes because the majority of coins are a variant of Bitcoin (a fork) which means they still use Bitcoin’s open source and original protocol but they make small changes to the underlying code they believe will make their coin and sequentially their new blockchain better.
There are many altcoins that aren’t derived from Bitcoin’s open sourced protocol however. They have created their own protocol and Blockchain. Examples of these are Ethereum, Ripple, Waves and Omni. The important thing to understand about altcoins is that each has its own and unique blockchain. Even if the coin is derived from another there will be differences in the underlying code that will make it unique. Some are designed to be faster, others are designed to be more secure, the discussion goes very far as to what is the best way to set up a blockchain with the best features to host a digital currency.
Tokens
Tokens are the representation of an asset that resides on top of a blockchain. So for example, the Wave or Ethereum platforms both allow you to create your own tokens that will use their blockchains. The tokens will follow the protocols of the blockchain but will have different “rules” you will have set up that the users of your token will have to follow. Creating tokens is a much easier process than a completely new altcoin as you do not have to modify the codes from a particular protocol or create a blockchain from scratch.
The way tokens are officially created and distributed are through ICO’s (Initial Coin Offerings). It’s very similar to crowdfunding a project and a lot of people nowadays are taken these ICO’s as opportunities to identify new projects to invest in.
So as a summary the main difference between coins and tokens is that coins are separate currencies and have its own and unique blockchain and tokens operate on top of other blockchains and facilitates the creation of new projects. The example that involves the steemit.com community is @Steem as the altcoin and @SBD as the token.
Pros vs Cons
What is difficult about making a pros vs cons list is the perspective you take. So for this list I imagine we are looking at staring a new project and we are trying to decide between creating a new coin or a new token. In the discussion in the comments you should consider the applications of both in creating new projects as after all this is the biggest application they have: incentivizing new projects for different sectors.
I would like for you to COMMENT on what do you think are the cons and pros of using an altcoin or a token.
Try to specify which type of project it would be for and think about how Altcoins are difficult to create and costly, scalability is difficult as a decentralized system makes it more complicated to reach an agreed consensus (many forks appear for this reason i.e. Bitcoin Cash)
Tokens do not require Wallets from those wanting to exchange the coins and there are usually no fees. Altcoins however have need for third party coins (to make transactions with Fiat Money), with Tokens you need to change to a specific Altcoin usually before you change them into FIAT money.
It depends on your ability to weigh the risk of an individual transaction as an investment. if you want low risk low reward you'll go with the most secure one available. If you want the potential for bigger growth, then you'll have to take certain risks. but it will have to be specific to the deal. cheers,,,, following
Thanks for the insite! I agree although if you are trying to decide on something that has to be specific to a certain deal then tokens would be better, don't you agree?
it depends, I believe, again. If a coin, at that time, illustrates good worth, and value, especially over token it will have more power than it, right? well lets say the same can be true the other way as well, of course.
I would also like to ask, is there a chance that the person on the other end will desire a specific currency, and it could be either one, depending on the value that person sees in it. Its a people based practice, after all, and people have different intentions and wants. so if person A wants a token purchase of product A, because he has a good utilization of tokens, it is fair to ask for.
I think this is common in markets, compared to physical money, peoples participation in the markets shift, and so they shift the whole market.
That's why we're on steemit right now, right? but there may be something entirely new tomorrow.
I hope I was able to paint a reasonably depictive picture in all this gibberish
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