Cryptocurrencies or Token: Which is Better?
Are you planning to invest in an ICO (initial currency offer)? Well, congratulations. But which currency? Are you investing in a cryptocurrency or a token? Ever wonder if cryptocurrencies and tokens differ or just two terms with the same meaning?
If you think a coin is the same as a token, think again. Many people, even some crypto companies, think that token and cryptocurrencies are the same, but they are not. There are some big differences between crypto-tokens and crypto-currencies. Let's find out what.
a coin is simply a cryptocurrency that has its own blockchain. Coins like Bitcoin, Ether and Litecoin that were built with your own custom blockchains are real coins. Most new digital currencies are built on an existing blockchain. They are not coins.
For example, Bitcoin has its own Bitcoin blockchain, which acts as the underlying technology and sets rules for Bitcoin operations. So there are coins with their own blockchain that are built by making adjustments to the original Bitcoin blockchain. They are called altcoins as they are developed as an alternative to Bitcoin.
The purpose of a coin is purely financial. Coins are created to allow users to perform fast and secure money transfers from one point to another.
The need for a new currency arises when the existing currency lacks a certain function or the developer wants to create something new, however, he can still resort to the code of other existing currencies when developing a new currency.
A currency is generally used to transfer money or as a unit of value for goods/services or to hold. Certain other currencies may give you other specific rights or amounts as defined by the developer or company behind them. But the basic use of a cryptocurrency is for transactions.
The crucial properties of a cryptocurrency are — uniformity, portability, fungibility, acceptability, durability, divisibility and limited supply.
Um token is usually built on an existing blockchain. It uses all the resources of the underlying blockchain to create a new system.
A token strictly represents an asset or a utility and cannot, therefore, be treated as cash. It still has a market value, but not as significant as a cryptocurrency.
Unlike cryptocurrencies, tokens can be created and initiated by almost anyone as they require little technical knowledge and skills.
Tokens are typically created to provide backup for a decentralized application that uses blockchain technology.
The purpose of a token is entirely for and within the specific application for which it was created. Tokens can still be traded on the exchange, but their uses are limited.
In addition to the basic differences in creation, usability and applications, tokens and cryptocurrencies are similar. If you are not planning to create a completely new type of application or system that would require new blockchain technology, I would recommend that you create a token using an existing blockchain.
This will save a lot of time, money and resources you can use to develop the actual project.
The token is a utility that provides just one way for users to transact in the application. You can even use an existing token as ETH for this purpose.
However, if you are planning to develop a new currency, you should know that creating a new blockchain will not be an easy task.
In addition to developing the right code, you would need to create a very strong blockchain that cannot be hacked. For that, you would need to find and employ miners. In short, it is a time-consuming and expensive process.
From an investment standpoint, tokens are better than coins. The reason is that tokens are supported by applications designed to perform specific tasks.
The token has a specific purpose and will never go out of demand as long as the app has real-world uses.
Cryptocurrencies, on the other hand, are used only as money and to make payments and money transfers, all of which can be done with a single currency, such as Bitcoin.
So we don't actually need all the new coins. Therefore, it is not very likely that demand will increase in the case of coins.
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