What Is The Difference Between A Token And A Coin In Cryptocurrency

Welcome back to the Tribe! In this post we are going to discuss: what is the difference between a token and a coin in cryptocurrency.

Nothing should be considered investment or financial advice. Enjoy the ride!

Crypto terms

New investors that are entering the crypto space might be getting thrown off by terms. I mean, it is pretty easy to get things confused especially if they are new to you.

There are so many terms like:

  • Blockchain
  • Decentralized
  • Crypto
  • Cryptocurrency
  • Coins
  • Tokens
  • Hash Rate

And so many more we could list! In this post we want to focus on two specific terms that are often used interchangeably. Those two words are Coin and Token.

If you’ve been reading articles here and there or following people on Twitter, or maybe even listening to some people chat in Telegram, then you’ve definitely heard both words.

While people use them interchangeable, they are actually different things all together!

What Is The Difference Between A Token And A Coin In Cryptocurrency

The main difference between a token and a coin in cryptocurrency is that a coin is on top of its own blockchain, while a token is typically launched on top of another’s blockchain.

For example, Bitcoin is a coin because it has its own network and blockchain underneath the digital asset that stores data like transactions. Ethereum is another example of a coin because again it has its own blockchain, miners, etc.

While a project like USDC or USDT (both stablecoins) are actually tokens because they reside on top of the Ethereum blockchain. What that means is that they are hosted on top of the Ethereum network in order for them to work or function.

Now besides that, there is not a ton of difference between the two terms. Tokens and coins will function very much the same for anyone simply purchasing them or selling them on the market. In fact, you’d never know the difference.

The true differences come for developers and exchanges when they go to purpose updates for the projects or want to make changes to the smart contracts or blockchains for example.

So, for most of the market it does not matter if a project is a coin or a token.

Considerations

The other thing to consider is that if a project is a token, then it resides on top of another’s blockchain and is in turn vulnerable to anything that blockchain is vulnerable to.

For that reason, the token and coin it runs on top are connected. Especially if the network ever crashes!

While this is rare, this is something to consider before you jump into a project or invest your money into it.

Certain blockchains across the market can be trusted due to their reputation like:

And a handful of others. If a token is not hosted on one of the well known blockchains, then you are at a considerable amount of risk holding investments on it.

Comes To Investing

Although, another big question we get is: should you invest in tokens or coins?

Well, we don’t want to tell you where to put your money. Personally, we try to invest more in coins then tokens. Mainly because the coins in our opinion have more long-term value and scalability in the future. Tokens could be limited.

In addition, a fully built out blockchain with D-app capability could end up having hundreds of tokens built on top of it down the line which would only increase the blockchains utility.

This is something to consider, but when it comes to coin vs token prices, the difference is hardly ever factored in. Most investors just buy what they like or what is getting hyped on Twitter at the time like Doge or Shiba!

What Is The Difference Between A Token And A Coin In Cryptocurrency Post

Thanks for reading our post on the difference between a token and a coin in cryptocurrency! We hope this post helps new comers differentiate between the two things, but also realize that when it comes to speculative trading there is not much of a difference.

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