Altcoins and Tokens: The term altcoin refers to digital currencies other than Bitcoin. Tokens are cryptocurrencies that exist on another blockchain rather than having their own.
As we explore cryptocurrency I’m sure you’ve come across two particular terms altcoins and tokens but do you know the difference between the two? If you don’t no worry this is what we’re going to answer in this article If you google the term cryptos you’ll usually find a whole lot of information and you’ll find that the term altcoins and tokens are usually sorts of blurred together and incorrectly, but they just sort of throw everything into one pot now as you’ve learned on this blog so far you would have known that bitcoin was the first horse out of the gate when it came to this brand new digital asset protected by cryptography.
In fact, bitcoin’s success set off a chain of events that actually led to an explosion of development within this industry as such it wasn’t long before other cryptos began to jump up onto the scene and appear on scene each with their own ecosystem. Now when we think of a digital coin like cryptocurrency let’s just historically jump into what a coin actually is.
What is an Altcoin?
So when we look historically we know that a coin is a circular metal disk that was used to exchange value between people this is then its key defining feature thus when we talk about an altcoin an alt refers to an alternative coin this is simply any coin other than bitcoin that also transfers value.
Some examples include polka dot, litecoin, and bitcoin cash but there’s slightly more to it than that. We now need to try and work out whether crypto is free-standing crypto or whether it’s a crypto that’s been based on another platform or what I mean. Well since 2017 there have been a number of platforms that have actually helped people to build their own cryptos these platforms are referred to as depth platforms in other words decentralized app platforms and examples include Cardano, Neo, and Ethereum.
What is a Token?
When somebody creates crypto that’s based on a GAAP platform these are then known as tokens. These tokens are used to transfer information and at times value as well, so some examples include USD, Tether, Chain link, uni swap, and Charles let’s just elaborate on this further to illustrate my point many of you know a site called wix.com now what is wix.com used for? It’s used as a platform that you can build a website off of so if you don’t have a website you can go to wix.com and register with them and you think you can then create your very own website however it’s not really your own website why do I say that because it’s based on wix.com so if anything happens to Wix, if they go bankrupt, if the site goes down it will affect your website because it’s built on their platform. So if we use the same analogy when it comes to crypto or our terms altcoins and tokens. An altcoin is in a freestanding website not Baltimore for anything else it’s a freestanding website whereas a token is a website that will be built off of a third party application like wix.com.
There are also companies that tokenize their business in order to raise capital for people to invest in these projects, they are then issued tokens and these tokens represent a share in the company or project. Even though these tokens can be sold at a later stage it’s not a currency the token is simply a digital representation of an underlying asset.
Related: What is Tokenomics? | Tokenomics Explained
Example of Tokens
So I’m going to use an example in South Africa with a website called realsmart.io so real smart is a company that has purchased the property in the pearl valley estate in pop and they’ve taken that and they’ve actually broken down their property into tokenized shares so you can go to the website you can then use your south African ranch to purchase real smart tokens and you would use those real smart tokens to purchase tokenized shares of this property. You would also then earn interest on the number of shares that you have, again these shares can be sold at a later stage but it’s not currency remember tokenized shares are simply a digital representation of an underlying asset. So folks I hope this helps you understand the difference between an altcoins and tokens.
Read: Top 10 Crypto TIPS Before BUYING Your First Crypto
Tokens are cryptocurrencies that exist on another blockchain rather than having their own.
The term “altcoins” refers to digital currencies other than Bitcoin. Any coin.
Ethereum is a coin because it has its own blockchain. Tokens are cryptocurrencies that exist on another blockchain rather than having their own.
Initial coin offerings (ICOs) are used to launch some tokens, even though they aren’t actually coins. Despite the technical differences, some tokens are also referred to as altcoins. Even though one of the biggest cryptocurrency exchanges views all tokens as altcoins.
The cryptocurrency sector claims that the key distinction between coins and tokens is that while coins are created by platforms and applications that are built on top of an existing Blockchain, tokens are created by platforms and applications that are native assets of a Blockchain like Bitcoin or Ethereum.