Crypto Tokens: What Are They?

When it comes to the world of crypto, there are a lot of tiny details that can be very important. Of course, before investing and trading, you need to learn all of them and make sure you can analyze the market. Doing your own research is very important in the world of crypto. One of the first things to learn is the difference between coins and tokens. Let’s find out a coin and a token meaning by using a few popular examples, like Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Chainlink (LINK). 

What are crypto tokens?

What is a security token versus a coin? Both coins and tokens are digital assets. However, tokens do not have their own blockchain. This means they are created and working on already existing blockchains. And you cannot actually mine a token. Instead, tokens can be minted. They are used for fundraising, storing funds, and paying for goods and services. Such projects are often funded with ICO (initial coin offering) process. 

Making a token is not a difficult process. There are ready-made solutions that can help create a cryptocurrency of your own. They work just as easy as website constructors that let you create your own website. 

So when we talk about tokens, we mean such currencies as Ripple (XRP) or Chainlink (LINK). Coins, on the other hand, have their own blockchains. Examples of coins include Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Polygon (MATIC), etc. And what about altcoins? Basically, every asset you use except Bitcoin is an altcoin. 

How crypto tokens work?

As mentioned earlier, unlike coins, tokens do not have their own blockchains. They use already existing ones. A blockchain is a database (also referred to as a ledger) located on the nodes in one network. Each node stores information about transactions. Blockchains are so great because they make data secure and do not use a third party for completing transactions. Crypto tokens, in turn, are considered to be value units on blockchains. This system makes secure online payments possible. 

Tokens are transaction units that can be created by using templates. For example, the Ethereum blockchain allows the creation of cryptocurrency tokens. These networks have smart contracts with self-executing codes for processing transactions. They take care of the execution, making it possible to track every transaction.

What is the difference between crypto tokens, coins, and altcoins?

Beginners often confuse these terms. However, the difference is quite obvious. Let’s take a deeper look at it:

• Tokens don’t have their own blockchains, as we already established earlier. They are issued on already-created blockchains. They also can’t be mined.
• Coins have their own blockchains. They are mined in different ways (for example, with Proof-of-Work or Proof-of-Stake algorithm). Examples of coins include giants such as Bitcoin or Ether.
• Altcoins are all cryptocurrencies except Bitcoin. Some people also define altcoins as all assets except BTC and ETH, because a lot of cryptos forked from these two assets.
• There are also utility tokens. This is a type of tokens created for serving a certain role in the ecosystem. They allow users to perform specific actions on the blockchain.

How to buy tokens?

The process is basically the same to buying any cryptocurrency in the world. There is no difference from buying coins like Bitcoin or Ether. 

First of all, you need to decide which platform to use. It can be DEX or CEX exchange. However, the second type is considered to be more secure. A good example of such a platform is WhiteBIT. 

On WhiteBIT, you need to create an account and pass the verification first. After that, you need to deposit funds to your balance. This can be done from your bank card or from a crypto wallet. There are a lot of different cryptocurrencies on WhiteBIT, so you can choose the one you like a start trading it, or buy it and hold it on your balance. 

As you can see, there is a big difference between tokens and coins. You need to understand what you want to use them for before choosing which asset to buy. There are both advantages and disadvantages of tokens and coins. So do your own research and pick the best currency to buy on the best platform there is.