Crypto Coin vs. Token: What Are the Differences?

Like any savvy investor, you know that the key to growing your wealth is diversifying your investment portfolio. Traditional investment options include 401(k)s, IRAs, and bonds. If you’re tired of utilizing the same old methods to build your net worth, then you’re probably trying to think outside of the box with your investments.

Cryptocurrency is one of the most modern forms of investment that you should consider adding to your portfolio. Curious about crypto coin vs. token? Read on to learn the basics!

What Is a Crypto Coin?

A crypto coin is probably the first thing you think of when it comes to cryptocurrency. After all, Bitcoin literally has the term “coin” in its name. What sets crypto coins apart?

The first thing you need to know is that crypto coins operate on a blockchain. A coin’s blockchain tracks all of the transactions that have occurred involving that particular coin. If you pay someone with a Bitcoin, and that person later pays someone else with that coin, then both transactions are tied to that coin’s blockchain.

The second thing you need to know is that crypto coins were created to function the same way government currency functions in our society. Many people use their crypto coins to purchase products online from companies like Amazon and Tesla.

What Is a Crypto Token?

Crypto tokens are similar to crypto coins, but they operate differently.

The biggest difference is that crypto tokens do have their own blockchain technology backing them up. Instead, they operate on other coins’ blockchain, and transactions are made via smart contracts. Once spent, the token physically moves from one place to another.

One of the biggest examples of tokens is non-fungible tokens (NFTs). NFTs are typically individual items that change ownership from person to person, and they have some form of sentimental value. Think of a token like a deed to your family’s land, where the value fluctuates and depends on the demand for it. 

Tokens can also be traded in for services, but they cannot be used to make a purchase.

Which Is Better?

When it comes to filling up your cryptocurrency wallet, is it better to have crypto coins or crypto tokens? The answer to that question depends on a couple of different factors.

First, it’s important to remember that coins are currency, while tokens are assets. In order to get tokens, you need to have crypto coins to make the purchase. In the short term, crypto coins are more liquid and equate to real monetary value. If you’re wanting to build a collection of items that have a value that could grow over time, then tokens are a better option.

Crypto Coin vs. Token: Which Will Purchase?

When it comes to crypto coin vs. token, the differences might seem quite subtle. The differences really come into play when you’re using your cryptocurrency to make a purchase. The best way to remember which one to use is that coins are for products and tokens are for services.

Making decisions about your financial future is one of the hardest things in life. You’re bound to have questions about those decisions along the way. Be sure to check out the rest of our blog for the answers to all of your financial questions and much, much more!