When Bitcoin emerged in 2009, it had little — if any — competition in the new digital money world. By 2011, however, competitors had adapted the blockchain technology used by bitcoin to build their own platforms and digital currency. The race to produce more crypto began.
What Are the Crypto Types?
Cryptography can be divided into two types:
- Coins (Bitcoin and altcoins) (non-Bitcoin cryptocurrencies)
- Tokens are programmable assets that reside in a platform’s blockchain.
While many individuals use the terms crypto, coin, and token interchangeably, it is critical to understand how they vary.
Comparing Cryptocurrency Coins and Tokens
Coins and tokens are both cryptocurrency, however they serve different purposes. Coins are a sort of currency constructed on its own blockchain. For example, Ether (ETH) is an Ethereum-based cryptocurrency.
Altcoins are any non-Bitcoin blockchain-based cryptocurrency (more on those below).
Tokens are programmable assets that allow the formulation and execution of individual smart contracts. These contracts can prove ownership of assets not on the blockchain. Tokens can represent value units such as electricity, coins, digital currency, points, and more.
How Do Altcoins Work?
The name “altcoin” means “alternative to Bitcoin,” and most altcoins aim to improve upon Bitcoin. Namecoin, Ethereum, Peercoin, Litecoin, and USD Coin are all altcoins.
Limited supply of coins in various cryptocurrencies like Bitcoin helps drive demand and perceived value. For example, the quantity of Bitcoins that can be created is limited to 21 million.
In spite of the fact that most altcoins are based on the same technology as Bitcoin and share some of its traits, each one has its own Some altcoins utilise a different method to create and validate blocks. Smart contracts and lower price volatility are examples of new features.
Tokens Are a Type of Currency
Like stock offerings, tokens are frequently produced and distributed via an Initial Coin Offering (ICO). They are:
- Vouchers (like bitcoins)
- Tokens of authentication (which are similar to stocks)
- Tokens of utility (designated for specific uses)
Tokens, like American dollars, indicate value, although they aren’t worth exactly $1. But tokens can be used for various purposes. A token varies from a coin in that it is built on top of an existing blockchain like Bitcoin or Ethereum.