Crypto Token Is It? The Following Is Understanding And Difference With Crypto Coins

Illustration. Bitcoin (Flick-Pixabay).

YOGYAKARTA Crypto tokens are one of the digital assets that is currently loved by the world community, including Indonesia. For those who are still common with the cryptocurrency world, crypto tokens are often equated with crypto coins, considering that tokens can develop into coins.

Crypto tokens are cryptocurrencies running within the system of a crypto coin, not a live blockchain system. Thus, crypto tokens do not have their own blockchain and only ride on certain crypto coin blockchains.

An example of the crypto token is Aave. Aave is a decentralized money market application (decentralized financial - DeFi) with the Ethereum blockchain base. In this case, Ethereum is a crypto coin and has its own blockchain system. However, in Ethereum there is space used by the Aave crypto token.

Meanwhile, crypto coins are digital assets located in the cryptocurrency transaction support system network without having to go through third parties or their respective blockchains.

Differences in Crypto Tokens and Crypto Coins

Compiled by VOI from various sources, Tokens and crypto coins are very difficult to distinguish, especially if you don't know the background of a crypto asset.

To find out the differences between the two digital assets, you must read information about the blockchain system used.

In general, there are three differences in tokens and crypto coins, namely:

For more details, see the description below

1. Blockchain System

A digital asset will be referred to as a crypto coin if it has its own blockchain system. This is different from crypto tokens operating using the crypto coin blockchain system.

Well, the growing crypto token will start creating and using its own blockchain to escape the coin that originally houses it.

2. Transfer Rules

Crypto coins cannot transfer to other coins because there are differences in blockchain systems. On the other hand, tokens can transfer other tokens as long as they are still in one blockchain.

For example, the Aave token can barter with the Chainlink crypto token because both of them are still in Ethereum's blockchain system.

3. Reput

Crypto tokens and crypto coins can both be used as investment objects. However, you should consider the reputation of the coin before buying crypto assets.

When the price of a token falls, the price of the crypto coin used as its blockchain will not necessarily be affected. On the other hand, if the price of a crypto coin falls, various crypto tokens in it will also fall.

How Crypto Token Work

The way crypto tokens work is very similar to the vending machine or without a seller or using a third party.

Sellers or third parties in crypto token transactions are replaced by a decentralized recording system. Even so, there are still securities that bridge sales and purchases of tokens using fiat money.

Meanwhile, in blockchain technology, tokens as a form of digital currency can be transferred to other parties as payments. When making transactions, either delivery or receipt, Smart Contract (a set of codes used as a form of recording on a crypto token) will record that and render it unmanaged.

That's the explanation of crypto tokens and the difference between crypto coins. Hopefully it can increase your insight into the world of crypto assets.