Difference between Token and Coin in Cryptocurrency

Difference between Token and Coin in Cryptocurrency :

What are tokens, and what is the difference between that and cryptocurrencies? A token is a digital asset that was developed within a blockchain platform. Ethereum, NEO, EOS are blockchain platforms that facilitate the creation of tokens so that they have specific standards, protocols, applications and functions that represent the value of a project or utility.

Imagine a ethereum as the App store and s token as applications, but in this case are decentralized. Normally tokens are offered to the public in the form of ICOs, and can be exchanged for other tokens when the project matures a bit.

The main difference between a token and a cryptocurrency is that cryptocurrencies use their own blockchain, and tokens use a cryptocurrency’s blockchain to function. Ethereum created the ERC 20 standard for creating smart contract tokens. Anyone can create a token, which has its own or unique functionality. For example, the Chinese / Canadian entrepreneur Changpeng Zhao created Binance Coin with the ERC 20 standard to create a token that is used within his exchange. They released the coin to the public in the form of ICOs, and they raised $ 15 million in 2017.

The main functionality of the Binance coin is for users to have discounts when they exchange with this currency to other cryptocurrencies within the Binance exchange. Today, the Binance Coin handles a volume of $ 60 million daily and they normally charge 0.05% for each exchange of currency using the Binance Coin (compared to the 0.1% that it charges if another cryptocurrency is used to make exchanges such as bitcoin, Ether, and Tether). Binance’s daily volume without using its home currency is $ 1.2 Billion.

Today there are three types of token:

  • Security Token : The token backs a physical asset such as real estate, stocks, etc. The investor normally expects to have a return on his investment so the only reason he invests is to hope to make money with such a token.
  • Utility token : The functionality of the token is the endorsement of a product / service of the project to obtain discounts, exclusives, or access. The investor buys such a token to be able to use the platform and interact with the company’s service / product.
  • Payment token : Similar to the security token but it is supported as a traditional mode of payment (the dollar, yen, gold etc) or it is used as an item of inherent value.

What do you think?

Written by mrsuns

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