Token, Coin and Virtual Money: What’s the difference?
Tokens, coins, and virtual currencies are all in the category of cryptocurrencies but differ in the way they are developed and operated on the platform.
The difference between Coin, Token and virtual money comes from the nature. For example, JPMorgan Chase releases JPM Coin as a “digital currency”, while Facebook introduces Libra as a “cryptocurrency”. However, both are not confirmed by financial experts as virtual currencies, cryptocurrencies or digital currencies because they are run by corporations and are centralized.
In addition to the core decentralized factor, cryptocurrencies are now built with the ability with strong encryption to minimize risk and ensure immutability. Most of them are developed based on blockchain technology and distributed via decentralized computer networks. To make it easy to distinguish, modern cryptocurrencies are divided into two main types: Coin and Token.
What is Coin ?
Coin is a kind of digital currency, created based on encryption technology and save value over time. Bitcoin (BTC), Monero (XMR) and Ether (ETH) are good examples of Coin with a common point being built on their own blockchain. For example, BTC works on the Bitcoin blockchain, XMR exists on the Monero blockchain, ETH is used in the Ethereum blockchain. They all allow investors to send, receive or dig.
Coins have similar properties to cash. They can be exchanged, divided and limited in accessory. Therefore, Coin is often used to pay instead of cash. ETH is one of the exceptions. It has all the properties of the Coin but it also is used in the Ethereum blockchain to make transactions convenient.
In addition, there is a definition called “altcoin” used to describe the type of coin instead of Bitcoin. Many altcoins are developed using Bitcoin’s open source protocols such as Litecoin (LTC) and Dogecoin (DOGE). However, some people still confuse ETH and XMR as altcoins even though they are built on a brand new blockchain. According to Coin Telegraph, cryptocurrencies are only considered altcoins when they have their own blockchain, different from Bitcoin.
What is Token ?
Tokens are digital assets that act as a payment method within a certain project ecosystem. Unlike Coin, Token requires a different blockchain platform to operate. Ethereum is currently the most popular platform for token creation. Tokens issued based on Ethereum’s ERC-20 standard are often referred to as ERC-20 tokens.
For example, the upcoming GES Token is an ERC-20 token. GES Token owner are considered as shareholders in the ecosystem. Based on the amount of tokens held, each person will receive a reward from the system revenue according to the corresponding proportion. This mechanism helps increase the demand for more GES Token. The greater the need of holding GES, the higher the value and the more sustainable the growth.
Many types of tokens are created for use in Decentralized Applications (DApp) and developer networks. These are called Utility Token, with the purpose of giving project owners access to the Basic Attention Token (BAT). BAT is an ERC-20 token to promote the digital advertising industry on the Brave browser. Companies use BAT to buy product showcase spaces, pay content creators and users to view ads.
Beside, there is a security token, which represents a form of investment contract. In particular, securities token holders expect profits to increase in the future as dividends. Moreover, securities tokens must comply with the strict regulations of securities laws.
The difference between Virtual Money and Digital Money
The difference between virtual and digital currencies is much more noticeable than tokens and coins. Cryptocurrencies describe all forms of cryptocurrencies, including virtual currencies. The concept of digital money appeared in the research published in 1983 by David Chaum, author of DigiCash – the first digital payment type released in 1990.
The characteristic of digital currencies only exists in digital form. Different from cash, investors can only own digital money through a digital wallet and a connected network, usually without intermediaries like banks. Therefore, the trading of cryptocurrencies takes place very quickly with extremely low costs.
Meanwhile, Virtual money is “digital money built and controlled by developers and used as a means of payment among members of the virtual community,” according to the European Central Bank. For example, tokens in World of Warcraft, FIFA Points in FIFA of EA Sport.
According to AP Style Book, cryptocurrencies are in a broader range of digital currencies. Unlike cash or digital currencies, virtual money can be issued by a company and has volatile value.
The concept of cryptocurrencies has been existed for more than 10 years, but the authorities have been paying attention to them for the past 5 years, when Bitcoin began to gain popularity. Last year, Facebook announced a controversial Libra release project, prompting many countries to set up task forces to review and adjust Libra.
Cryptocurrencies are also classified by each regulatory authority in a different way, depending on their views. As the authorities lag behind due to the rapid development of the cryptocurrency market, new terms for cryptocurrencies may emerge in the future.