Blockchain, the new-age innovation, being the major disruptive technology across various industries, lays out global opportunities for new business models. And one of the reasons behind blockchain technology becoming well-known is that the cryptocurrency: coins and tokens.
It might seem a little complicated, but before getting into the details, it is necessary to understand the difference between a cryptocurrency – coin and a token.
The idea behind the evolution of cryptocurrency was to develop a digital currency independent of any central authority. In addition to this, cryptocurrencies made quick electronic transactions that avoided higher transaction fees and independent of any go-betweens.
Cryptocurrencies are the decentralized digital assets that are independent of a platform. These cryptocurrency coins can be used as a currency outside their native system. A decade ago, when Bitcoin BTC (a cryptocurrency coin) was launched, the entire global monetary system dived into the new revolution. And with this began the NEW ERA.
So to be precise, Bitcoin operates and functions on the Bitcoin blockchain platform. Ether on the Ethereum blockchain and NEO on the NEO blockchain. All the crypto coins exist on the global database with no physical presence. All the transactions are tracked, verified, and recorded on the global blockchain network.
Coins are similar to real-life cash. They are transferred, exchanged, and stored as a value. For example, BTC is used to pay for goods and services, or exchange it for an equal value or buy anything priced in BTC. So the whole purpose of coins is to serve as digital cash or money. However, a few crypto coins possess other features than just serving as money.
Tokens represent a security or a utility with particular worth – a voting right, stake, or value unit. A token represents the virtual currency, particularly fungible and tradable asset or utility offered over an ICO, short for Initial Coin Offering. Depending on their design and purpose, tokens can fulfill several roles in society. Tokens belong to a particular platform; for example, ERC-20 is the most popular token of Ethereum. However, there are many others like NEO, Waves, Lisk, and Stratis.
Most tokens are utilized with decentralized applications or dApps. When these are created, the developers decide on how many units can be made and where to be sent. Tokens are often the switch between the applications they are designed for!
For example, users can utilize Musicoin to unlock various features of the Musicoin platform. So, users can enjoy music videos or play a song on the same platform. Similarly, Binance token – BNB allows users to trade with a 50% lesser transaction fee. Thus, each token has its purpose.
Before we end this topic, let’s make this clear – cryptocurrency space is expanding day-by-day. Undoubtedly, the next-generation will widely use the cryptocurrency platform than the way we use it today.