Cryptocurrencies can be very difficult to wrap our heads around,
Cryptocurrencies can be very difficult to wrap our heads around, especially since Blockchain Technology shrouded the computing language.
Those who are interested to learn more about cryptocurrencies and blockchain technology may find it as a huge barrier.
Not to worry!
If you are one of those who find it as a huge barrier, this article is for you. Here, we will try to understand the different terms – Tokens, Coins and Altcoins.
Ready? Let’s go…
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Coins vs Tokens
Even if most of the coins don’t function as a medium of exchange, it’s imperative to understand that all the coins or tokens are regarded as cryptocurrencies.
Oftentimes, the term cryptocurrency is regarded as a misnomer as a currency technically represents a store of value, a unit of account and a medium of exchange.
Such characteristics are inherent in Bitcoin. Since the crypto space was given a kickstart with the creation of Bitcoin, all the other coins conceived after Bitcoin is usually considered as a cryptocurrency, however, most of them don’t actually fulfill the aforementioned characteristics as a currency.
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Two Most Common Categorizations of Cryptocurrencies
Altcoins (Alternative Cryptocurrency Coins)
Also known as Alternative Cryptocurrency Coins or simply “coins,” Altcoins are often used interchangeably. They are referred to as coins which are an alternative to Bitcoin.
A significant number of altcoins are variant (fork) of Bitcoin, built using its original protocol with changes to its underlying codes. Therefore, altcoins conceives an all new coin with a different set of features.
A central idea of modifying the open-source codes for creating new coins is known as hard forks. A few examples of altcoins are Auroracoin, Dogecoin, Litecoin, Peercoin and Namecoin.
There are other altcoins which are not derived from Bitcoin’s open-source protocol. Besides, they have created their own blockchain technology and protocol supporting their native currency.
Examples of such coins include, Counterparty, Waves, NEO, Bitshares, Omni, Ripple and Ethereum.
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Tokens
Tokens are a representation of a particular asset or utility residing on top of another blockchain. They mainly represent any asset which is fungible and tradeable, from commodities to loyalty points to other digital currencies!
Creating tokens is an easy process as you don’t need to modify the codes from a particular protocol or create a chain of blocks from scratch.
What all you need to do is to simply follow a standard template on the blockchain that allows you to create your own tokens. This functionality is made possible via blockchain smart contracts and programmable computer codes which are self-executing and don’t require any third-parties to operate.
It really is super cool!
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Conclusion
The primary difference between tokens and altcoins lies in their structure.
The altcoins are separate currencies with their particular chain of block. On the other hand, tokens operate on top of a blockchain facilitating the creation of decentralized applications.
The majority of coins in existence are tokens as they are quite easy to create.
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