Coins and tokens are often used interchangeably, but they have distinct differences. While all coins can be classified as tokens, not all tokens qualify as coins.
Coins have native blockchains, while tokens are based on existing blockchains, serving as currencies for applications on those blockchains.
Ethereum’s native asset is Ether (ETH) and ADA’s native asset is Cardano. These are considered coins. Tokens, like Uni which is a native asset of Uniswap built on Ethereum, are based on pre-existing blockchains.
Creating a coin is more challenging than creating a token. A blockchain may have one coin but host hundreds or thousands of tokens.
Coins and tokens vary not just in their core principles but also in their use cases. While Bitcoin is seen as a store of value, offering an alternative to traditional banking, other coins prioritize digital transactions, aiming for speed and cost-efficiency. Specific coins like XRP by Ripple target solving particular issues, such as cross-border payments, and enhancing real-time international transactions through blockchain technology.
Tokens are essential in decentralized apps, representing value, stakes, or voting rights to encourage interactions with protocols. They serve multiple functions within their ecosystem; for example, SUSHI, the native token of Sushiswap, is used for staking, governance, and rewarding users for depositing assets into liquidity pools.
Tokens have the power to represent assets through tokenization, including both digital and physical assets like real estate on the blockchain. Token use cases are highly flexible with endless possibilities.
In the crypto world, coins are akin to buying a house – involving creating a blockchain, security considerations, and scalability planning. In contrast, tokens are like renting a house through an agency, granting access to specific features within a blockchain. Examples of coins include Bitcoin, Ethereum, BNB, Litecoin, Solana, and Cordana, while tokens encompass cryptocurrencies like UNI, SUSHI, and CAKE.
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