What is difference between token and coin?
Pratik Jain
By: Pratik Jain

What is difference between token and coin?

The terms Coin and Token are usually used in place of each other. But both have a different meaning and connotation.

Coins have only one utility — to act as simple stores of value with limited-to-no other functionality. With “simple” value, it is implied that value not represented through a variety of dynamic functions. Tokens are a totally different type all together. They can store value of nature of compound, multi-faceted levels. Bitcoin was the first blockchain concept that the world was introduced to. Bitcoin targets as a replacement to cash-that will be a digital version of the paper money and that can be in circulation for centuries. All these are the quintessential ‘coin’ model, where focus lies squarely on the speed, cost, and ease of transacting in relation to the status quo. Just as other coins, Litecoin and Ripple are also considered coins, to be the serving as only function that is to denominate value in an exchange of goods or services. Accordingly, their relative price in fiat money reflects their likelihood to become a popular, liquid form of money someday.

With a far more focused purpose, tokens are also a medium of exchange. Where coins compete in an arena with countless participants due to their largely singular ambition, tokens are a type of instrument that is useful in specific markets or even single businesses. They’re created in a more derivative fashion with an initial token sale (ITS) and built upon an existing blockchain that supports smart contracts like Ethereum. Investors receive tokens from the business running the offering, by funding the contract with the more liquid underlying coin. These companies recognize that they can serve customers in a specific niche better by creating a tokenized model, and the tokens are how customers will participate in the service that will eventually be built with this newfound capital.

Tokens are a better way of circulating value between businesses and their customers and ensure that each gets a better deal than if they had transacted in cash. In such type of safe, self-sufficient cycle, it would not matter whether cash is absent, as each side of the table get what one requires.

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