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The cryptosphere can be an overwhelming place, with terminologies that may sound like a foreign language to newbies. And these days, tech jargon is growing faster than you can stream Korean dramas.
So when digital asset traders start throwing around terms like “Dash”, or “Monero” or “Kava”, it may leave outsiders a little confused, especially when most people think Bitcoin is the only cryptocurrency. To help you get started on learning the language of crypto, here’s a short introduction to the difference between Coins and Tokens.
WHAT IS WHAT?
While both coins and tokens are forms of cryptocurrency, functionally there is a slight difference. To put it simply, coins such as Bitcoin, Litecoin, and Ethereum are independent blockchains. Their value tends to depend on the market’s and people’s enthusiasm for it.
Tokens, on the other hand, are built on top of existing blockchains or platforms such as Omni, Ethereum and TRON, and value is derived from the purpose of use.
As an example, Bitcoin is essentially an encrypted digital currency that can be utilized as a form of payment for goods and services, or as an investment. When it comes to interchangeable and tradable digital assets, tokens take center stage. At the time of writing, there were 2,401 cryptocurrencies (coins and tokens) listed in CoinMarketCap’s rankings.
However, cryptocurrency is not the only exciting element of blockchain technology. Smart Contracts are revolutionizing the way we deal with transactions. These are digital contracts built on a blockchain with established agreements that are automatically executed when conditions are met.
The automated nature of smart contracts helps two or more parties carry out and complete transactions without the involvement of a middleman or third party. With Blockchain’s powerful cryptographic security, a smart contract is literally uncompromisable once it is finalized, allowing transparent, accurate and secure transactions.
So, which cryptocurrency to throw your weight behind?
NOT SO CLEAR CUT
There is no real one-size-fits-all, it comes down to your preference in the functionalities. Some would swear by Bitcoin, such as the growing community of Bitcoin maximalists.
This group of investors pledge allegiance to Bitcoin, proclaiming it as the only true cryptocurrency. We can’t wait for them to have matching outfits and Sunday sermons. Then there are those who prefer to go above and beyond digital cash and grab their share of tokens.
At the end of the day, the only constant in the world of investment is – that there is no such thing as a risk-free investment. Let’s take this year’s Bitcoin performance for instance.
RISE & FALL
Not since its golden age in 2017 have we seen Bitcoin prices soar to record highs. In June 2019, prices shot past the $10,000 mark per Bitcoin, doubling its value from early April this year. However, it eventually dipped below $8,000 towards the end of June, which is roughly a 31% nosedive after registering a yearly high of close to $13,000.
LAST BUT NOT LEAST
The wise way forward is to firstly, take time to understand cryptocurrency and how Bitcoin and tokens work and how it is valued (check out our Content Hub for more useful articles).
The next and probably best step is to get professional advice from experts (like our Bitazza Brokers). These are crucial to help you make an informed decision on your choice of cryptocurrency investments.