When you are investing in cryptocurrencies, apart from researching legitimate options and the market risks, you also need to have an understanding of the technical terms. A lot of investors are confused between crypto coins and crypto tokens. Read on to learn the differences between the two.
Crypto Coins can be used to pay for different services and goods. Some of the most popular crypto coins are bitcoin, dogecoin, ether, monero, etc. It operates on a blockchain network and keeps track of every transaction involving the native crypto coins. Since these coins are decentralized, they don’t need a central issuing authority. For managing transactions and issues, they rely on code. They are built on either a DLT or a blockchain that allows the users to enforce the rules automatically.
Even though crypto tokens are similar to cryptocurrencies, they form a completely different category of digital assets. Like crypto coins, they also can be exchanged and have value. But, they usually represent physical assets, a service, or a utility. Some tokens can even represent art and real estate. These are programmable, meaning that they are running on software protocols composed of smart contracts. These smart contracts outline the functions and features of the tokens along with the rules of engagement of the network.
Even though you might think that there are not a lot of differences between the two, overlooking them can lead to huge complexities. One simple trick you can use is, use crypto coins for when it’s a product and use crypto tokens when it’s a service