What is the difference between Coin and Token
What is Token. What is Coin. How Token differs from Coin. What are altcoins.
With the advent of the blockchain, a large number of new words and concepts have appeared. For example, not everyone understands how Coin differs from Token.
On the Internet
In one of the blockchain chats, this question was answered:
— Nothing! This is the same.
The answer is not correct, but none of the participants in this chat corrected, maybe everyone was too lazy, or maybe they actually consider the answer to be correct. I read the chat history late, the answer would be out of place. So I decided to write an article about it.
Let’s start with the fact that Coin and Token cannot exist on their own, they need an environment where they will be located. This environment is called blockchain. In the Bitcoin blockchain, only Bitcoin lives. It’s like a country where only one nation lives.
In another blockchain, such as Litecoin, the Litecoin coin of the same name lives. The difference from Bitcoin is minimal, in fact it is a clone. In the Bitcoin blockchain, a block is formed every 10 minutes, and in the Litecoin blockchain, every 2.5 minutes. This change increased the speed of transactions, otherwise they are identical.
Coins that have their own blockchain are also altcoins. They were created as the best version of Bitcoin. Namecoin (NMC) became the first digital asset alternative to bitcoin, and Ethereum (ETH) became the most popular.
And so, Coin is a coin that has its own blockchain.
What is Token?
I think you guessed it. A token is a coin that does not have its own blockchain. The first blockchain that made it possible to create tokens in its environment was Ethereum. It is like a multinational state in which different tokens live, which obey the laws of Ethereum.
In the Ethereum blockchain, or as it is called “ether”, there is a main coin – ether. To transfer your token, you will need to pay a commission in ether. The commission price does not depend on the amount of the transfer, as in the banking system, but is determined by the workload of the blockchain and is constantly changing. The commission price can be changed down, but the transaction time will increase.
With the launch of Ethereum, it became possible to create Smart Contracts. This is an electronic contract, an analogue of a legal one. If the terms of the contract are met, then a transaction is executed on the blockchain.
As a rule, legal contracts are signed by a notary. This gives them more rights and provides protection from changes in terms after the signing of the document. A smart contract excludes a third party, from the moment it is uploaded to the blockchain, the contract data cannot be changed. This ensures the security of the smart contract.