As you already know, thousands of unique digital currencies have been circulating in the market since the launch of Bitcoin, the first-ever crypto. Though cryptocurrencies is an umbrella term for all types of cryptocurrency, it is used interchangeably with coins. Don’t get easily confused as all of the different cryptos generally fall into one of the two categories.
One is the Coins, which typically include Bitcoin and all of the alternative coins that followed, and the other is Tokens, which are programmable assets that reside within the blockchain technology of a particular platform.
You must know that most people use coins, crypto, and tokens interchangeably when referring to digital coins. Hence, it becomes important to understand how they differ from one another so that you’ll better understand what cryptocurrency is.
To make informed investment decisions, first educate yourself on the different cryptocurrencies and their pros and cons. And then stick to tried-and-tested crypto platforms or services. If you are a beginner in the crypto world, making the right assumption about whether to give a green light to a specific platform might be harder than it sounds. If this is the case, you can check out one of these platforms: Coinbase, eToro, or Immediate Edge.
The Alternative to Bitcoin
Since the first-ever crypto was released to the public, all the coins that followed right after were immediately considered altcoins, derived from the “alternative to Bitcoin”. Regardless, most of the altcoins were developed to be an improved version of Bitcoin in some way, and some good examples of altcoins are Litecoin, Ethereum, Doge, Cardano and so much more.
Interestingly, Ethereum is not considered an altcoin anymore as it emerged as the second largest cryptocurrency just behind Bitcoin. The majority of cryptocurrencies are forked from either Ethereum or Bitcoin, which is another reason why Ethereum is not categorized as an altcoin.
Similar to Bitcoin, most altcoins only have a limited supply of coins that could come into existence, which generally helps to create more demand and reinforces the market value of the coins. Take Bitcoin, for instance; the asset has a fixed number of coins that can be mined as the creator implemented it, so after 21 million coins are mined, you can’t get any more of it.
Although most alternative coins have the same principles, framework, and characteristics as the first-ever cryptocurrency, each offers something different from the others. Some altcoins have a different process to validate and produce blocks of transactions that can be added to the blockchain. Some others offer unique features like smart contracts or have the advantage of having lower price volatility.
Tokens
Another form of digital currency is Tokens. They are typically made and given out through an ICO, or the Initial Coin Offering, which is very similar to stock offerings. In general, tokens can be represented as value, security, and utility tokens.
Also, tokens differ from traditional digital currencies in the way they were constructed inside an existing blockchain of a particular asset like Ethereum or Bitcoin. Tokens are fungible and tradable, and can be used to represent commodities, other cryptos, or even loyalty points.
Cryptocurrency Coins Vs. Tokens
Although tokens and coins are considered a form of digital currency, they offer different features and functions. For instance, crypto coins are built on their own blockchain technology and were made to become a form of currency.
On the other hand, Tokens are built on an existing blockchain of particular crypto, like Ethereum and Bitcoin, but they’re not considered crypto but programmable assets.
Programmers can use tokens to create and execute unique smart contracts. These types of contracts can be used to establish some sort of ownership with a digital asset outside the blockchain’s network. Furthermore, tokens are made to represent a value, which includes items in the real world such as money, points, electricity, digital assets, and so much more, which can either be received or sent by the user.
Takeaway
When the first-ever crypto was launched a little over a decade ago, it established a crypto craze never seen before. There are already thousands of different digital currencies in the market that you can learn and invest in.
However, cryptocurrencies are not similar to currencies in the real world, as those are tangible currencies that are governed by central authorities and banks. Now that you’ve learned the different types of digital currencies, you have a general understanding of the biggest cryptos and how they differ from each other. With it, you can have the knowledge needed to make an educated decision on choosing the best one to invest in.
Also Read: Top 10 Cryptocurrencies To Look Forward to in 2024
