No, no, no, a coin is not a token! I know, it can be confusing. But think of it like this: a coin is like a real-life currency, while a token is like a casino chip.
Let’s say you go to a casino and buy some chips. Those chips have value only in that casino – you can’t use them outside of it. That’s what a token is like. Tokens are created and operate on a specific blockchain platform, and their value is usually tied to that platform’s ecosystem. For example, the Basic Attention Token (BAT) is a token created on the Ethereum blockchain, and it’s used within the Brave browser ecosystem to reward users for viewing ads.
On the other hand, a coin, like Bitcoin or Litecoin, is a standalone digital currency that can be used to purchase goods and services anywhere that accepts it. Like a real-life currency, it has its own value and can be traded on cryptocurrency exchanges.
In summary, while coins and tokens may seem similar, they serve different purposes in the crypto world. Coins are like standalone currencies, while tokens are more like casino chips that have value only within a specific ecosystem. Both use blockchain technology to operate, and to be a part of the blockchain, you need to have a node.
Coins:
Coins are cryptocurrencies that have their own blockchain. They are designed to act as a medium of exchange, much like traditional currencies. Examples of coins include Bitcoin, Ethereum, Litecoin, and Ripple. Coins are created through a process called mining, which involves using computer power to solve complex mathematical problems in exchange for newly minted coins. Coins can also be purchased on cryptocurrency exchanges or earned through various means such as staking.
Tokens:
Tokens are a type of cryptocurrency that is created on an existing blockchain. These blockchains are typically those of established cryptocurrencies such as Ethereum. Tokens are often used as a means of payment or reward within a particular blockchain ecosystem. Examples of tokens include ERC-20 tokens, which are built on the Ethereum blockchain, and Binance Smart Chain (BSC) tokens, which are built on the Binance Smart Chain. Tokens can be created using smart contracts, which are self-executing contracts that allow developers to create tokens without the need for a new blockchain.
We will certainly come back to this topic in the next few lessons and expand on it with related topics. Stay tuned.
If you have any questions about this lesson, please write them in the comments box below.
