If you are new to the cryptocurrency world, you are probably confused about the difference between tokens and coins, but don’t worry aren’t we all? (lol) So I will try to explain in a very simple way. But first, something I’d like to encourage beginners is to try to get acquainted with keywords used in the cryptocurrency world to help you flow. And at the end of this article I have separated some keywords that might help you.
Let’s get to it.
There are two terms to describe values in the blockchain cryptocurrency, tokens and coins, but even though they are basically the same thing, coins only denominate value in an exchange, it’s like USD or EUR, it operates “independently”.
Now, tokens even though they also carry value as a medium of exchange (buy, send, receive or trade), in order to exist, be created and perform it needs a platform, meaning it is “dependent” of a stage to work upon. You must be wondering now what a platform is, I’ll explain soon. But for now, that’s pretty much the main difference between the two, one is independent, and the other is dependent.
Now, just so you can see it for yourself, (and only if it won’t cut your train-of-thought okay? Or else you can see it later) check out CoinMarketCap, where you will be able to see coins and tokens that actually exist at the moment. You will be able to see how the coins are independent, the chart shows no platform other than the coin itself, and how the tokens have the extra column to show the platform which it stands on, in other words its “dependency”, base for creation or it’s stage.
So, like I said I would like to explain roughly what a platform is. Well it is also known as protocol, which is nothing more nothing less than a set of rules and anyone that becomes a part of it will have to respect its guidelines. Each platform has its own set of rules according to its blockchain which determines how every user involved interacts and communicates with each other. And not every platform happens to be a “token creator” which is the case for Bitcoin, as of this moment.
And Ethereum is an example of a platform, which allows anyone to create its own token under its smart contracts and blockchain ecosystem. And tokens under this platform are bought with ether (The Ethereum coin ETH).
Tokens are powerful creations on top of these protocols because they inevitably give the platform a reputation.
Another website you can check out is WINCO which is a perfect example of a successful token that operates as a coin on Ethereum’s platform.
Tokens are versatile and functional, and there is much to study on how they can actually perform. They are said to be a better way of circulating value between businesses and their customers. But why? Because they unify, emerge entities, where they each get the exchange or service they were looking for under a certain protocol.
Let me give you a day to day example:
It’s like when you go to a carnival, you get in, you exchange your money for the tokens so you can get to ride on whatever you desire, and with a certain number of tokens the carnival gives you a soda and a fried Oreo! Yum! Your tokens still carry a value, right? But now they will work as an easy-pass through the carnival, they will get you in the rides and your food faster! So instead of paying each ride you can just hand over your tokens. Your timing at the carnival was just made easy! Even if you had brought a friend with you, you’d be able to interact and communicate, enjoy your rides by simply using your tokens. You could even give your tickets to each other as you desire!
And that explains the concept of a TOKEN.
Think of your friend as the client or trader, think of the carnival as being the platform (DApps) and the cash as the cryptocoins, the exchange as trading, and the tokens, well as the tokens! Makes sense?
TOKENS MAKE THINGS EASIER.
In other words, TOKENS UNIFY! They bring businesses and their customers to function upon the same platform, with anonymity, yet with a fulfilled satisfaction on both parties involved, under a same set of rules and protocol. And as I have said tokens are very versatile and this is just one view of how a token is used in the crypto world.
At the end of the day the best way to understand is by buying some, getting your feet wet, and if I may, I will say this for your own good, try to explore this in the beginning without expecting much in return and keep your expectations intelligently in the near future. Truth is the time to understand and support this revolutionary world is now, because it is just a matter of time until this becomes accessible to everyone. Take a part in it now!
If you’d like to understand even further, I encourage you to study some of the keywords about the cryptocoin currencies.
Wikipedia has each one of these words available, just to make your life easier!