Difference Between Coins and Tokens

Jul 20, 2018

ure, you have heard about cryptocurrencies. Bitcoin, Ethereum Tokens, Ripple Token, Litecoin… The list goes on. But have you ever noticed the use of coins and tokens? What exactly are the differences between them then? Can they be used interchangeably, or do they mean different things?

Assuming that you understand the basics of cryptocurrency, let’s get down to it

First of all, it is important to note that both tokens and coins fall under the same broad category of cryptocurrencies.

If a project is powered by a token, it means that the project runs on a supported blockchain such as Ethereum. If it is supported by a coin, it generally means that the project is developing its very own blockchain, thus being able to mint its own coins.

Coins, also altcoins’, are alternatives to Bitcoin. Built using Bitcoin’s original, open-sourced protocol with slight amendments to the underlying codes, thereby producing an entirely new coin with a unique set of features. This concept is a “fork” — a split of the incumbent blockchain. A commonality between all coins is that they each possess their own independent blockchain.

Tokens, are digital assets; they represent a particular asset or utility. More importantly, since they are issued by the project (in exchange for funding it of course), tokens usually also act as the method of payment inside the project’s ecosystem with a right to participate in the network. It represents a company’s share and offer value and functionality over the speculative returns offered by coins.

At this point, there is further distinguishment between utility tokens and security tokens with the help of Howey Test, a test designed by the Supreme Court for this main purpose of differentiation. Tokens are built on another existing blockchain, such as Ethereum.

In the case of Spiking, the Spiking platform is built on the Ethereum blockchain, ERC-20 hence, it has developed its own SPIKE tokens. The functionality, as elaborated in the nature of a token, is to act as the investment currency in the platform in this context.

Therefore in this case, SPIKE tokens allow consumers who hold them to participate in the ecosystem, by mirroring transaction of big investors (whales) so that there is higher chance to profit from trading! Furthermore, the SPIKE tokens earned from mirroring the whales can be used for the enrollment of Certified Smart Traders (CST) Programme conducted by whales themselves. There is a clear use case of tokens, which provides functionality for token holders.

In summary, they differ in terms of structure, and thus utility. Coins, being an independent blockchain, often are separate currencies — a method of payment for buying and selling things. Tokens, being built on an existing blockchain, often facilitates functionality of platforms, giving access to products and services — having a specific use in the project’s ecosystem.

As what they say, “You can buy a token with a coin, but not a coin with a token.”


By Kent Teo, CEO — Invade Industries

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