What we need to know about Tokens and their difference with Coins

What is Token?

As we know, each coin is a cryptocurrency that has its own independent blockchain, whereas tokens are a type of cryptocurrency that do not have their own blockchain are run on top of other blockchains such as Ethereum or Tron.

So the main difference between coins and tokens is whether or not they have their own blockchain.

For example, Bitcoin, Ethereum, Ripple, and Tron are cryptocurrencies with their own blockchain; therefore, they are called coins. On the other hand, some cryptocurrencies such as Tether, ChainLink, Dai, and YearnFinance don’t have an independent blockchain and are therefore considered tokens.

Currently, around 4’000 cryptocurrencies are traded in cryptocurrency exchanges, and nearly 75% of which are tokens run on top of other blockchains like Ethereum or Tron.

Why were tokens built?

Most tokens are Utility Tokens that are created for a specific purpose and can be used only on their respective system. For example, if a token is defined for purchasing food, it can be used only for that purpose and not for other reasons like buying train tickets.

Moreover, creating tokens is far easier than creating a coin because tokens do not need a separate network and blockchain and they can be created on existing blockchains. So the development cost of a token is much lower than that of a coin.

In most blockchain projects, developers first use an existing blockchain to create their token and pre-sell it. The value of tokens depends on the progress of the project. If a token develops enough, the developer team will build an exclusive blockchain. In this case, a token will become a coin.

How are tokens built?

To create a token, developers must use programming language and standards specified by the host blockchain’s developer team. They also have to create their token’s smart contracts using the existing tools of the blockchain.

As mentioned earlier, creating a token is very easy. It takes less than an hour to create a token and the costs are negligible. However, what important is to make a token valuable, as it is not a valuable asset itself.

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