The cryptocurrency market is changing rapidly, and new terms are emerging along with technological development.
But no matter how advanced Blokchain technology is, the fundamental pillars of the market are the token and the coin. Paradoxically, many market participants still do not know the difference between the two terms and even think of them as synonymous. Unfortunately, there has been a lot of confusion about this for years, so the difference can never be explained enough.
What is a Token?
The token is the most basic form of asset available on the crypto market. Tokens are digital assets issued on a blockchain by a project. Their main purpose is to serve as a means of payment for goods and services within the ecosystem of a project. They also give their owners the right to participate in the network, joining groups or even voting for decisions on the development of the system, a bit like shares on the financial market.
What kinds of tokens are there?
To better understand the purpose of tokens, let’s divide them into two main categories: Utility and Security tokens.
So-called “utility tokens“, are exactly what their name implies: they are used as a means to achieve a goal, just like an amusement park token, which, once inserted into a machine, gives the owner the right to take a ride. Some tokens, however, have no value and are only created as a meme or on famous characters such as the Dogecoin or the Trumpcoin.
Secondly, we have security tokens, which represent the share of a project and give their holders the right to expect future profits, just like securities on the financial market. Security tokens are very complex, as they have to be approved by the financial authorities and are always under strict control.
What is a coin?
Coins are the first form of cryptocurrency born in the market and have a higher value than tokens. Coins are the original digital money, built on the basis of cryptographic technologies based on the blockchain. Just like fiat currencies (euro, dollar), coins are designed to maintain value and preserve it over time. The blockchain acts as a substitute for the real economic system and ensures transparency and safe operation.
Coins have many of the same characteristics as fiat money, as they are:
- Fungible, which means divisible into smaller portions
- Acceptable as an equivalent to fiat money in stores and service points,
- More portable than cash or bank cards
- Durable, due to their electronic nature
- Have limited availability, which guarantees their value through scarcity.
These are two of the main characteristics of coins, that make them stand out from all other assets:
- Coins can be mined (some have a maximum mining limit) and can be sent or received like ordinary currency.
- Coins are intended to act only as money and are not used in any particular project as a means to receive goods or services provided by that project.
A concept that further helps us grasp what differentiates the crypto-assets is fungibility. We talk about fungibility especially in relation to currencies and assets.
A cryptocurrency is fungible if each of its units is equivalent to the other and if it maintains its value when it is exchanged or transferred.
For example: if you have 20 tokens of YNG and you give 10 to a friend of yours, you will be left with 10 YNG, so half of the previous intrinsic value, and your friend will have the same amount of value, in whatever currency it is expressed.
In light of this, let’s see how the concept of fungibility is applicable to coins and tokens.
coins are always fungible digital money, acting as mere storage of value. Coins acquire value or devalue over time and can be mined.
Tokens can be both fungible and non-fungible. Non-fungible tokens are fewer and are usually unique digital assets such as collectable tokens.
Non-fungible tokens are designed to be special. Think of these tokens as unique and collectable items.
Diamonds, for instance, are available in all sizes, qualities and cuts.
This makes it difficult to determine whether two diamonds have the same value. A single diamond is comparable to a unique gemstone, which cannot be valued in the same way as all others.
CryptoKitties are the best-known example of non-fungible tokens. It’s a videogame where you breed virtual kittens, customising and exchanging them as assets.
Each CryptoKitty is unique and, depending on its features, it can be worth a lot of money.
Since there aren’t two of the same CryptoKitty, each has a very different worth. This makes it impossible to split a CryptoKitty into smaller parts, trade it for others and reuse it to create a new CryptoKitty with the same value, as is possible with fungible goods such as Bitcoin, or gold.
Where to buy coins and tokens?
Coins and tokens can be bought and sold on exchanges. The most popular way to buy tokens and coins is through dollars, euros or other coins. Tokens generally cannot be exchanged for other tokens, since exchanges work with coins or fiat currencies. To buy a project token, traders must use the fiat currency or buy a coin and then buy tokens. The same applies to coins, which can only be purchased with other coins or fiat currencies.
There are dozens of exchanges on the market, but one of the cheapest is Young Platform. It’s going to offer a wide range of pairs, and it already lists BTC, ETH, XRP, LTC, and of course the YNG token that can be earned directly with the Stepdrop app.
Young Platform is determined to provide an educational journey of the highest quality for both absolute beginners and experienced traders and fans of the crypto market. We invite everyone to read our articles and join our exchange to discover the full potential of crypto.