Digital assets are the latest version of investment for the masses that allows them to buy, trade, and make transactions from anywhere, earning whatever and, however. But what are these digital assets?
These are non-tangible assets that are created, traded, and stored in a digital format and include cryptocurrency and crypto tokens that utilise cryptography, an advanced encryption technique. One of the main reasons behind its fame is its assurance of authenticity that eradicates the possibility of counterfeiting or double spending crypto.
However, every other trader or investor in the cryptocurrency world was once confused with crypto coins and crypto tokens. To be fair, there is not much difference between the two on the fundamental level. This is because both can process payment, both are valuable, and, both can be swapped with each other, i.e., you can swap a crypto coin with a token and vice versa.
Digital Assets: Cryptocurrencies vs. Tokens
These two most common blockchain-based digital assets are cryptocurrencies and tokens which have one fundamental difference: cryptocurrencies have their own blockchains, while crypto tokens are built on an existing blockchain.
Moreover, it also comes down to their usage. There are some things that can be done using a crypto coin and cannot be done using a crypto token, while some things can be done using a crypto token and cannot be done using crypto coin.
Our advice: It is better to have both in your crypto wallet as both are useful and valuable.
Now let’s understand how they work individually.
What is a crypto coin?
Crypto coins, like bitcoin (the first ever crypto coin), operate on a blockchain. It keeps track of all the transactions involving that specific coin. An example would be the Ethereum blockchain that keeps track of all the ether (another crypto coin) transactions.
These digital coins were made to replace the common currency (notes and coins). Although it has not been possible for now, the future looks bright from here because crypto coins have made many transactions possible.
Moreover, these are mined – traditional mining through POW (proof of work) and the other on lighter energy consumption method known as POS (proof of stake).
What is a crypto token?
As mentioned above, crypto tokens do not run on their own blockchains, but work on other blockchains. Because crypto coins trading is handled by blockchain, crypto tokens rely on smart contracts – an array of codes that allow transactions between the users.
Spending a crypto token means physical change in its place, that is, change of ownership is handled manually.
Crypto tokens and crypto coins both represent value, but one represents a digital currency (crypto coin) and the other represents assets (crypto token).
Furthermore, there are some restrictions about where you can spend the crypto token. You can buy tokens with coins, but tokens can also carry more value than coins.
To sum it up, the token method existed long before there was any thought of crypto currency, but it does not have any significant impact on the crypto world. But what it does is represent what you own.