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A brief dive into what distinguish a token from a coin

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Avatar for youngdim12
Written by   26
1 month ago

Hello Friends. Thank you for reading my write-up again. I haven't posted in a while since I've been busy, and I believe that being one-sided is beneficial to me this days in order to retain my focus and achieve my major goals. Even if it has been difficult thus far, but everything has been worthwhile.

The crypto market has remained bleeding over the past few days, with no signs of recovery and the trendy phrase remained "Crypto Crash." Unfortunately, I just keep up with my busy schedule, devoting little time or effort to my crypto portfolio; the story is simply terrible, sad, sad.

To avoid heartbreak, I've decided to ignore my portfolio. Let us wait for good news.

I'm still considering several possibilities to jump into in the meantime, but I think it's fairly reasonable for a trusted, well-known, and sustainable initiative. The first option is to keep holding, while acquiring NFT is also an option, but I haven't made the decision on any of the others, because this has become a survival game and if have been affected try to control your temperament and emotion, don't be drive by emotion and follow your concious mind wisely.

Back to the today's topic.

I have more topic to write about, even my loss in this beer market is enough. well, I'm refraining myself from writing about that, although I have written something related before but, I don't want to continue writing about it.

Today's post will briefly describe what a token and a coin are and how they vary. The topic was inspired by an argument that I chance to read on torum.

The concerned individual lacked sufficient knowledge of what a token is and where the transaction fee goes, he didn't know that Torum's XTM is a ERC-20 token which require ethereum for transaction fee, resulting in a heated argument between him and one of the torum's team; he claims that the withdrawal fee was pegged to Ethereum for their own gain and compares the process to the saying "monkey dey work, bamboo dey chop." Story for another day. The torum guy tried to explain everything to him in detail, but despite his efforts, he insisted on knowing the process better than him.

Click the image for source

I had a similar scenario a few years ago since my grasp of cryptocurrency was so limited that I couldn't tell the difference between a token and a coin. Actually, I'm not sure if every token uses the primary coin of a specific network as a transaction fee. This happened to me when I tried to swap CAKE token to BUSD on uniswap; despite owning many tokens on bep20 (binance smartchain) and signing several contracts on Binance smartchain and Ethereum, I couldn't tell the difference between a coin and a token. In a nutshell, I became stuck and had to contacted support; as a result, I therefore have firsthand and clearer understanding about it.

What distinguishes token from a Crypto coins?

Depending on whether it is a native of its own Blockchain or not, cryptocurrency can be a token or a coin. As an example, SmartBCH has its own Blockchain, and the native cryptocurrency of this Blockchain is known as Bitcoincash, making it a crypto coin, however in the case of tokens, it does not have its own blockchain and instead uses another cryptocurrency's blockchain, thus it is considered a token.

Tokens, like cryptocoins, may often be transferred, exchanged, purchased, and sold, and they are stored in blockchain wallets. Tokens are digital assets that can be used as currency, but they also fulfill other functions because smart contracts are possible. The additional use case include; Governance, Defi, Reward, and Non Fungible Token (NFT) respectively.

Governance tokens are decentralized in the sense that every token holder has the right to make a (Voting right) decision that determines the future of that project based on the number of token held; the more tokens held, the more voting power.

In a Defi system, each platform has its own official token that serves as its money, and this token is used to incentivize investors in the form of a reward or loan.

As previously stated, the Defi platform utilizes a reward token. DeFi platforms rely on investors who lend their own cryptocurrency funds. As an incentive, investors earn cryptocurrency payouts. These rewards are generally distributed in the form of crypto tokens..

Non Fungible Tokens (NFT) represent a digital asset signatory. These assets are kept in the form of cryptocurrency tokens.

All additional usecase stated above are limited to tokens only, which distinguishes them from crypto currencies.

What are transaction fee?

A transaction fee is paid when a particular amount of cryptocurrency is transferred from one wallet to another, according to Alexandria.

Our everyday banking transactions follow that same technique and implied the formal definition; hence, it is ideal to pay a transaction charge for each transaction.

This charge is split between miners and those who are paid to verify transactions.

In conclusion, crypto-coin work on a Blockchain while tokens work on smart contract and has more usecase than just a being digital money.

Crypto-coins operate on a Blockchain, whereas tokens operate on smart contracts and have more functionality than just digital money.

Cryptocurrency transactions are levied to pay the miner and those who verify each transaction.

Lead image source from my torum post

You can also find me on ReadcashNoisecashTorum and on Twitter

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Written by   26
1 month ago
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Comments

Thank for this piece, before I'm not really sure of the differences . I thought all coin are coin , no other thing else.

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