Know the Difference Between a Coin and a Token
First, it’s important to understand the difference between coins and tokens. Both are cryptocurrencies, but while a coin – Bitcoin, Litecoin, Dogecoin – operates on its own blockchain, a token lives on top of an existing blockchain infrastructure like Ethereum. A blockchain is, at its simplest, a record of transactions made on and secured by a network. So while coins have their own independent transaction ledgers, tokens rely on the underlying network’s technology to verify and secure transactions and ownership. In general, coins are used to transfer wealth, while tokens can represent a “contract” for almost anything, from physical objects to event tickets to loyalty points.
Tokens are often released through a crowd sale known as an initial coin offering (ICO) in exchange for existing coins, which in turn fund projects like gaming platforms or digital wallets. You can still get publicly available tokens after an ICO has ended – similar to buying coins – using the underlying currency to make the purchase.
What Is Blockchain?
All of a sudden, blockchain is everywhere. The technology, which was invented in 2008 to power Bitcoin when it launched a year later, is being used for everything from copyright protection to sexual consent (yes, really).