A Coin Vs A Token

When I did not have a washing machine to wash clothes, I went to a local laundry. There I would buy tokens to insert in a washing machine and then in a tumbler, and then in a dryer. Those washing machines did not accept coins but accepted tokens, because by employing tokens they would not need to change feeders in the machines every time they wanted to raise prices.

This is the main difference between a coin, a cryptocurrency of today, and a token, used in many blockchain projects. Coins are simular to regular money, they have universal use, while tokens are issued for a specific purpose only.

You may also want to know that coins, such as bitcoin, ethereum, monero, dash run on their own blockchain, while a token, such as NTK, is based on an existing blockchain. The company behind NTK, Neuromation, is a provider of modern solutions in artificial intelligence and they issued NTK to buyers of datasets to be able to purchase datasets from knowledge miners at platform to be launched by Neuromation. NTK is ethereum based just as many other tokens.

Thus, the ethereum is a coin but NTK, a token issued recently by Neuromation, providers of AI solutions, is an ethereum based token.

Again, cryptocurrencies help to transfer value in an accepted way (just as fiat money), but tokens can be used for various use cases in a blockchain. Such as NTK to buy and sell datasets, and WPR by WePower to buy excess electric power from each other.

The confusion in the interchangeable use of words coin and tokens arises, when tokens may not only be bought for coins, but also sold for coins. Once they become tradeable, they in fact become a coin. The main function of any currency is to transfer and to store value.

To conclude, coins usually have the following features.

Number 1 – They own blockchain or ledger.

Number 2 – they usually have own method of earning or generation – usually proof of work (PoW) or proof of stake (PoS).

Number 3 – Quite often they can be mined, using a certain algorithm, you may have heard of SHA-256 to mine bitcoin.

Tokens, on the other hand are usually built on top of an existing blockchain, the most popular of which is Ethereum. Some of these ‘tokens’ are simply assets, which have a certain value, same as tokens you buy in a casino to play Black Jack or place on a zero in a round of roulette, while others represent a portion of a company, i.e. shares. Tokens are virtual assets. Think: loyalty points, like frequent flyer miles.

In practice, coins have universal monetary value, while tokens are issued to fulfill a specific task only, like NTK tokens to be used to purchase computing power to produce datasets on the coming platform by Neuromation. The confusion arises as tokens are placed on exchanges, and become tradeable as coins.