Cryptocurrencies Vs. Tokens

The terms digital assets, cryptocurrencies, and tokens are often used interchangeably. Although these terms have different meanings.

What is a Digital Asset?

“Digital asset” is a broad term that describes a non-tangible asset that can be stored in a digital format. With blockchain technology, this refers to cryptocurrencies and tokens. Cryptocurrencies and tokens are a subset of digital assets, both created using cryptography to ensure their authenticity, but they are distinct.

What Is a Cryptocurrency?

A cryptocurrency is a native asset issued directly by the blockchain it runs on. Cryptocurrencies can be used on the blockchain to pay gas fees like ETH for the Ethereum network or reward the miners for creating new blocks like BTC for the Bitcoin network. Additionally, it can be traded, used as a medium of exchange, or a store of value. Cryptocurrency blockchains can have different utilities, such as smart contract capabilities that enable the creation of tokens on their blockchains.

What is a Token?

Tokens are representations of value created on top of an existing blockchain through smart contracts. Tokens can have different standards; for example, on the Ethereum Blockchain, a person can create an ERC-20 standard representing a fungible token such as the USDT token, or an ERC-721 standard representing a Non-Fungible Token (NFT) like a Crpytopunk. Moreover, different tokens have different utilities and can be used in Decentralized Finance (DeFi) platforms or to represent tangible and non-tangible assets.