, 3 years ago

What are Tokens?

There are coins and there are tokens and, in some cases, both terms seem to mean the same thing. In this article we are going to provide some definitions.

What is a Coin?

The term “coin” or “altcoin” derives from the very first cryptocurrency, which is Bitcoin. While the term altcoin points to the fact that the cryptocurrency in question is trying to be an alternative version to Bitcoin, the term coin simply includes all crypto.

But what is needed to qualify as a coin? There are just two things that all coins have in common:

  • The crypto runs on its own blockchain
  • It runs independently

As soon as both criteria are fulfilled, we are speaking of a coin.

What is a Token?

A token is the opposite of a coin, meaning that it is dependent on an already existing blockchain and it cannot run independently. Tokens are often used as an asset or as a utility token in a smart contract economy. But there are more use cases:

  • A token can be a currency
  • It can represent shares in a company
  • A governance token enables the owner to vote

It is also worth mentioning that a token can hold any of these qualities at the same time. So, a token that represents a share in a company might also be a functioning governance token, enabling the shareholder to exercise his right to vote.

Why are both terms used for the same thing?

Since a token can be designed as currency it can then be used for payments. This is the exact same use case for coins, since they are designed as crypto. The difference is not only the technical aspect but also the fact that coins are meant to serve this one purpose. To be a unit of account and a store of value that can be transacted.

Tokens on the other hand can fulfil the same role, but as we have shown above have more and broader use cases. So, is it okay to use the terms synonymously, since they both can serve the same purpose?

No, a token does not have its own blockchain and it is dependent. It is not a coin.

Check out the market overview

Featured articles
Four trading strategies for crypto
Bitcoin and Ethereum: what are the differences?
What determines the Bitcoin price?
Related articles
Shiba Inu price prediction for 2023, 2025 and 2030 

Apr 11, 2023

Shiba Inu (SHIB) is still one of the most important meme coins in the crypto ecosystem. Dogecoin is indeed the mother of all meme coins and tokens. One could argue that SHIB is just another copy, but there is more to it. It is building its own unique DeFi ecosystem that is meant to create more value in terms of Dollars as well as user experience. This puts Shiba Inu in a special place when comparing it to other meme tokens that have no or less ambitious plans. 

Trade anytime, anywhere

Boost your trading impact and reaction time in over 80+ cryptocurrencies via instant access to your portfolio with the LiteBit app.

App Store
Google Play Store
  • 2525 Ventures B.V.
  • 3014 DA Rotterdam
  • The Netherlands
More info
  • About LiteBit
  • Support
  • Sell
  • News
  • Education
Subscribe for updates

Sign up to stay informed via our email updates

Explore popular coins
© 2023 LiteBit - All rights reserved