Digital Assets: Cryptocurrencies vs. Tokens

Summary

Cryptocurrencies and tokens are the two most common blockchain-based digital assets. The main distinction is that cryptocurrencies have their own blockchains, whereas crypto tokens are created on top of an existing blockchain.

Contents

What Is a Digital Asset?

If you’re new to blockchain and cryptocurrency, knowing the distinction between digital assets, cryptocurrencies, and tokens is critical. While these phrases are sometimes used interchangeably, they differ in several important ways. Broadly speaking, a digital asset is a non-tangible asset that is created, traded, and stored in a digital format. Cryptocurrency and crypto tokens are examples of digital assets in the context of blockchain.

What Is a Cryptocurrency?

A cryptocurrency is a blockchain network’s native asset that may be traded, used as a medium of exchange, and stored of value. A cryptocurrency is often referred to as a blockchain’s native currency since it is issued directly by the blockchain system on which it runs. Cryptocurrencies are frequently used not simply to pay network transaction fees, but also to motivate users to maintain the cryptocurrency’s network security.

  • Built on a blockchain or other Distributed Ledger Technology (DLT) that allows members to automate and trustlessly enforce the system’s rules.
  • Decentralized, or at least not reliant on a central issuing authority. Instead, cryptocurrencies rely on code to manage issuance and transactions.
  • To secure the cryptocurrency’s fundamental structure and network technology, it employs cryptography.

What Is a Token?

Tokens, often known as crypto tokens, are digital units of value created by blockchain-based organizations or projects on top of existing blockchain networks. While they frequently share extensive compatibility with the network’s cryptocurrencies, they are a whole new digital asset class.

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