Key Takeaway
All cryptocurrencies are technically tokens, but not all tokens are cryptocurrencies.
Cryptocurrencies primarily focus on being a form of money. Tokens have a much broader range of potential uses beyond just acting as currency.
Cryptocurrencies (Coins)
- Their Own Blockchain: Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) operate on their own native blockchain. Think of the blockchain like a giant, unchangeable record of all transactions on that network.
- Used as Currency: Cryptocurrencies are primarily designed to act as digital money that can be used for payments, as a store of value, or to participate in decentralized systems.
- Mining or Staking: New coins are often created through a process called mining (like Bitcoin) or staking (like some newer cryptocurrencies).
Tokens
- Built on Existing Blockchains: Tokens don’t have their own blockchain. Instead, they are built on top of existing blockchains like Ethereum.
- Wide Range of Uses: Tokens can represent almost anything! They can be used for:
- Digital Ownership: Representing ownership of digital art, collectibles, or even real-world assets.
- In-App Currency: Used within specific games or platforms.
- Governance: Giving holders a say in the direction of a project.
- Utility: Providing access to specific services or functions within a system.
