DeutschDo not confuse cryptocurrencies, altcoins and coins – Often terms such as tokens are used synonymously in practice, even if there are sometimes major differences between the individual terms:
- Cryptocurrencies
- Coins
- Altcoins
- Token
Coin, for example, is a term that is generally used for digital currencies (cryptocurrencies) and equally for altcoins. Strictly speaking, altcoins are all digital currencies except Bitcoin, as they are intended to be an alternative to the leading digital currency. However, the so-called tokens must be distinguished from coins and cryptocurrencies.
What is a Token?
What it is in detail is not exactly defined. However, it is certain that you can compare tokens with a type of voucher, which in turn represents a specific economic good or asset. In practice, you are acquiring a type of share certificate, which does not necessarily have its own value, but which can still have a certain price due to demand, at which it is traded.
Technical Distinction between Tokens and Coins
From a technical point of view, the distinction between tokens and coins is clearer. While every cryptocurrency, i.e. the coins, has its own blockchain, this does not apply to the “digital vouchers”. Instead, it is a characteristic feature that these can only exist on the basis of a foreign blockchain. The prime example is certainly the Ethereum Blockchain, because numerous tokens are generated via this platform, usually by means of so-called Smart Contracts.
What are Tokens Used for?
An interesting question is what these are actually used for in practice. As a rule, they are issued to investors in the course of so-called Initial Coin Offerings (ICO). The interested investor invests money in the company, which raises capital through the ICO. In return, he receives the “digital vouchers”, which certify a certain right – usually to an asset. Whether these can ever take on a realistic value depends, of course, primarily on demand, which in turn is strongly linked to the development of the company.
