Nowadays, cryptocurrency has become a common term and most of us may know different kinds of cryptocurrencies. Moreover, you may also know the trading processes of these currencies. Some people may have also invested in cryptocurrencies. If you want to invest in cryptocurrencies, you must understand the technical terms associated with cryptocurrencies. Sometimes, we may use cryptocurrencies and crypto tokens interchangeably. Here, you should understand that there are fundamentals differences between these two terms. Therefore, we should not confuse these two terms. No doubt, crypto tokens and cryptocurrencies both are digital assets. Anyhow, cryptocurrencies are using their blockchains. On the other hand, we have to build the crypto tokens on the existing blockchain.
What Are Cryptocurrencies?
Cryptocurrencies are the native assets of blockchain networks. We can easily trade and utilize it as a medium of exchange. They have become the blockchain native currencies. Its reason is that we are using these protocols to issue these currencies. That’s why the users have to pay the transaction fees on the networks. As a result, these networks are providing security to the users. If we are thinking of it as a medium of exchange, we can easily use it to acquire goods and services. Anyhow, if we think of it as a store of value, we can easily use it to held or store fiat currency. When we will use it as a store of value, we may incur significant losses.
Before utilizing cryptocurrencies, we should understand their significant characteristics. First, it is following a decentralized process for trading. It means that it is not relying on a central issuing authority. The management of transactions, it is relying on the codes. Secondly, we have to use blockchain or DLT to run it. It is allowing the users to enforce the rules of the system. To enforce these rules, we have to use an automated process. Thirdly, we may have to face some problems while underlying the structure and network systems of cryptocurrencies. For this reason, it is using cryptography. Fourthly, it has started to win the trust of the investors. After investing money in this network, the investors can use it to buy goods and services.
What Are Crypto Tokens?
The units of values that blockchain projects can develop on top of existing blockchain networks are crypto tokens. No doubt, they are showing deep compatibility with the cryptocurrencies within the blockchain network. Anyhow, they are showing a different digital class to the users. Here, we should understand that a cryptocurrency is a native asset of the specific blockchain protocol. Anyhow, we have to build the tokens on top of these networks. For example, if we will use the Ethereum blockchain network, we have to use Ether (ETH) as its crypto token. No doubt, Ether is one of the best crypto tokens that we can use on this network. Anyhow, if we don’t like Ether, we can use various other tokens on this network.
The most common crypto tokens that we can build by using this platform are LINK, DAI and CryptoKitties etc. If we have to use these tokens, we have to take part in the decentralized process of this network. While taking part in its decentralized process, we can get access to its platform-specific services. If we want to create these crypto tokens, we can use various token standards. ERC-20 is the most widely used token standard. If we want to enable non-fungible tokens, we have to use ERC-721 standards. The most important benefit of these tokens is that we can’t interchange them with similar types of tokens. Sometimes, we have to expand the use cases of these tokens. Under such a situation, we have to grow different tokens at a remarkable pace.
According to an assignment writing firm, we should understand that these tokens are programmable, transparent and trustless. The programmable feature of these tokens shows that we can run them on software protocols. On the other hand, the permissionless feature of this token show that anyone can get access to these tokens without using special credentials. The trustless feature of these crypto tokens shows that we can’t control them by using central authority protocols. It means that if we want to control these systems, we have to follow some predefined rules. Anyhow, the crypto tokens are transparent. This feature is showing that we can easily verify and view its rules. We can view and verify these rules while making transactions. Just like cryptocurrencies, we can also use crypto tokens to hold value. That’s why we can easily use them to exchange traditional or digital assets or services.
For the representation of the tangible assets, we are using crypto tokens. In these tangible assets, there comes real estate and art. In some cases, we are also using them for the representation of intangible assets. In the intangible assets, there comes data storage space and processing power etc. We can also use these crypto tokens for governance mechanisms. These decisions are dictating the future directions of blockchain projects. The process that we use to create crypto tokens is known as tokenization. No doubt, the blockchain industry is growing at a rapid pace. To meet the multifaceted needs of the ecosystem participants, we are using these crypto tokens from the organizational level to individual users. It means that we have to create digital assets within the digital world. By using these assets, we can easily manage countless operations of the industries.
No doubt, the cryptocurrencies world is full of various terms. These terms get familiar within less time. After getting familiar with these terms, we can easily use these terms. Mining and tokens are among these terms. If you are learning blockchain from an academic point of view, you must know the difference between cryptocurrency and crypto tokens. Anyhow, if you want to invest, you will have to read the facts and figures of these two terms. Now, some people are using these two terms interchangeably. This thing is creating confusion among the people. No doubt, these two terms are appearing to belong to the same thing. They are two different terms. You should know that crypto tokens are the subsets of cryptocurrencies.