Difference Between Tokens and Cryptocurrencies: How Much Do You Know?

Cryptocurrencies, tokens… Big words that can confuse ideas. What is the value of a token? But above all… What is a token? It all started before the Internet, but now its meaning is mostly digital. And it is often confused with cryptocurrency.

What is a Token?

In the digital world of blockchain technology, a token is nothing more than a small virtual token (literal translation) whose value is established by the issuing company. Tokens are units of value, and represent a virtual asset.

In other words, just like a coupon inside the supermarket, the token is an object that has a value only within a certain context. Let's take for example a 10 euro discount on your next Amazon purchase: these 10 euros, converted into tokens, which are usually given as a gift following a small performance or service, actually have a value only within the context that provided them.

Another classic example are the bracelets of SPAs or concerts, inside which a currency that can only be spent within the structure is inserted - so as to avoid theft. And maybe earn something from the exchange point of view.

Il most common means of creating tokens is called Ethereum, platform from which smart contracts are executed. On this decentralized platform, developers design their applications or contracts on a custom blockchain. In the Ethereum ecosystem, tokens are us as ERC-20, among the most used in the world of cryptocurrencies.

Let's take for example i security tokens, i.e. those that generate expectations of obtaining economic benefits. Let's imagine them a bit like means of investment.

- utility tokens, on the other hand, do not generate expectations of obtaining economic benefits. They are oriented towards offering a concrete utility in a platform or application, which confers rights to use products or services.

- equity tokens they are what identify an asset possession.

But what is the difference between a cryptocurrency?

La difference between tokens and cryptocurrencies it should be clarified because the two elements are, in fact, similar to each other. For example, they are a community-accepted unit of value and both are part of a blockchain.

The main differences are in the way these interact with the blockchain. Cryptocurrencies work with their own independent blockchain, and can be "mined", or obtained through data processing by computer. Tokens, on the other hand, are generated on an existing block and cannot be "mined". They are also used for a multitude of problems as they can represent all types of activities and resources.