Earlier, the word cryptocurrency was a very new term for many people. But today it has become of the most common terms used almost every day. There are different cryptocurrencies available in the financial market today. And not only that but many people have invested a very good amount in cryptocurrency trading. It is very important for every one of us to do in-depth research about cryptocurrency before we invest in it, to reduce the risks of loss that you may have to face due to it.
In this process, you will come across many new terms related to cryptocurrency. Sometimes, there are a few words that are used interchangeably with one another. Two such terms are cryptocurrency and Token. But they are two different terms. If you are also one of those people who often get confused with two similar words, then here is the difference between cryptocurrency and token at Bitcoin Aussie-System or below:
Contents
Digital assets:
If you have just started with cryptocurrency and blockchain, then cryptocurrency, digital assets, and tokens are the most common words that you come across. It can be tough for you to understand them and their difference at the initial stage. Tokens and cryptocurrencies are a subclass of digital assets. Cryptocurrency does not have any issuing authority like the traditional paper currency. You can store digital assets in digital wallets like you store your currency and use them whenever you need it. Also, you can invest or trade with digital currency. You will be able to make good profits with digital currency trading.
Cryptocurrencies:
Whenever we talk about cryptocurrency, the first thing that comes to our mind is Bitcoin. They are the native currency of Blockchains. They are issued by the blockchain protocol as they run on them. You can use cryptocurrencies for trading, they can be a medium of exchange and also be used as a store of value. Medium of exchange means you can use it for buying goods and services. When it comes to the store of value, you can easily convert them to fiat currency whenever you wish to. You can use the cryptocurrency for paying the transaction fee and also for incentivizing the users so that the network is secure.
Cryptocurrencies are decentralized currencies. That means, there is no issuing authority. They are available in digital form and available only on the ledgers. The transactions are transparent to everyone.
Tokens:
When it comes to the token, they are frequently used in exchange with cryptocurrencies, but that is not correct. They are entirely different digital assets. Many people think that Ether is also a cryptocurrency, but no it is not. Ether is a token and belongs to the Ethereum blockchain. There are many other tokens like COMP, LINK, or DAI and these are also dependant on the Ethereum platform. Just like any other cryptocurrency, there is a specific value for tokens and even they can be used for exchange. Along with all this, the token can hold a value of a physical asset like real estate. This entire process of creating tokens and then assigning some value to these tokens is called Tokenization.
The cryptocurrency craze is increasing every single day. Along with their value and craze, the value of tokens also keeps increasing. Each cryptocurrency has a unique blockchain, while each token is built on an existing blockchain. There are different types of tokens available in the digital world.
Difference between Cryptocurrencies and Tokens:
There is not much difference between cryptocurrencies and tokens. But when even this minor difference is overlooked, you may have to face problems with understanding it well. One simple way with which you will be able to understand it well is what you can buy with it. If you are going for any products or goods, then you use cryptocurrency, and when it is a service you can go for tokens. You will be able to use tokens in a very similar way like you use traditional money. They move from one person to another when you buy something.
So, these were some of the most important differences between cryptocurrency and tokens. This can help you understand what makes them different from one another.
