In this article, we are going to let you know the differences between coin and token.
When discussing cryptos, you may hear the terms “coin” and “token” frequently used. While they may sound like interchangeable terms, there is a distinctive difference, and it’s important to keep them straight.
COIN
This is a digital asset that is native to its own blockchain and acts in much the same way as traditional money. It can be used to store value and as a means of exchange between parties in business with each other. Think about Bitcoin, Litecoin, or Ethereum. Each of these coins exists on their own, respective, independent blockchains.
So, to make this a little clearer:
– BTC operates and functions on the Bitcoin blockchain
– ETH operates and functions on the Ethereum blockchain
– ADA operates and functions on the Cardano blockchain
– DOT operates and functions on the Polkadot blockchain
– TRX operates and functions on the Tron blockchain
TOKEN
This has more use beyond the concept of digital money. Tokens often get called Digital Coins. However, this isn’t correct. There is a major difference! They are created on top of an existing blockchain and can be used as part of a software application like;
– Granting access to an app or activity within,
– Verifying identity
– Tracking products moving through a supply chain, or they can even represent digital art (like with NFTs, or “non-fungible tokens,” that certify something as unique).
There’s even been experimentation with using NFTs with physical assets, such as real-life art and real estate. For example, a limited edition luxury car brand can attach an NFT to certify its authenticity (like a receipt), record its sales history, track ownership and even assign royalty to an item.
The “Coin vs Token” confusion stems from the fact there are coins we often occasionally refer to as to tokens, because we are unable to figure out how a digital enitity could exist as a Coin and Token at the same (E.g Ethereum). This, in fact, is a misnomer.
Ethereum is not the same as an Ethereum token, or Ether.
Ethereum is the Coin that is built on its own Blockchain. An Ethereum token is built on the Blockchain of the Ethereum Coin, and Ether is the official, native token of the Ethereum Blockchain.
Tokens built on the Ethereum blockchain are called ERC-20 tokens.
There are over 200,000 ERC-20 tokens with popular ones being LINK, USDT, MATIC, and UNI.
Smart contracts are used to create ERC-20 tokens, to facilitate transactions of tokens, and record balances of tokens in an account.
Ether is an example of a token, which is used to make transactions on the Ethereum network. The difference between Ether and other ERC-20 tokens is that it’s the Native token of the Ethereum Blockchain.
XRP is not a Coin but a Token. It’s not even same as Ripple. It was merely built on the Ripple Blockchain, owned by;
Ripple Labs Inc., an American technology company which develops the Ripple payment protocol and exchange network. Originally named Opencoin and renamed Ripple Labs in 2015, the company was founded in 2012 and is based in San Francisco, U.S.A.
BNB was originally an ERC-20 based token until 2019 when it was moved off of it and based on the Binance chain. it can however—just like a variety of tokens—still interact with other Blockchains via Chain swaps.
A Cross-Chain swap enables trading tokens across different supported blockchains, thereby enabling seamless use of these tokens on various platforms of exchange.
A cross-chain is simply interoperability between two independent blockchains.
This is implies that a Token can be supported on multiple Blockchain networks despite being based, hosted and built on a specific Blockchain (e.g USDT, BUSD). Users are often required to trade the said tokens through compatible Blockchains. This is why you can’t send USDT (TRC-20) from Exchange/Broker A to a USDT (ERC-20) Wallet on Exchange/Broker B. A Crossed -Chain swap before transfer solves this.
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