At some point most people will be confused when they hear the terms coins and tokens being thrown around.

This confusion is understandable because the crypto currency movement is still evolving.

It all started with someting called Bitcoin and then everything after that made the waters more murky and unclear.

Basically there are two things.

Coins and tokens.

Coins like Bitcoin and some of the top cryptos can be used like digital cash to buy things and tokens can not.

To be called a coin, it must have its own independent blockchain and these include Bitcoin, Ethereum,, XRP and a few others.

Now Bitcoin was the first crypto to come out so it basically got to make up all the rules.

However bitcoin was set up to just be like a currency and Ethereum was set up to be much more.

Ethereum was set up to be a coin and a programmable blockchain that allowed them to build or let others build 3 types of applications onto it including smart contracts, nfts and DeFi.

Hundreds of other tokens/coins have come out in 2021 by relying on the Ethereum blockchain until many of them got tired of the high fees to use them (called gas fees) and many have created their own blockchains.

So most of the other coins don’t have their own blockchain but rely on Ethereum almost like an analogy of whales and tiny fish in the ocean.

‘We”ve probably all seen those ocean documentaries where they show a whale or a big fish swiming around and hundreds of tiny fish just hanging on for dear life getting a nice ride.

In a small way, tokens are the small fish taking advantage of the technology often called Ethereums ERC20 protocol to create themselves..

So lets go back to explain coin versus token.

The best example to understand this is that there are tokens for Uber travel and these tokens can be used to get a ride in an uber but you can’t buy a loaf of bread with it.

You can buy a loaf of bread with a Bitcoin in certain rare groceries that accept it.

Most ofher cryptos can not be instantly withdrawn from your exchange as cash but often have to be converted to another crypto first like bitcoin and then taken out to be cash in your hand,

So there are handful of main types of tokens.

  • utility tokens
  • governance tokens
  • security tokens

Utility tokens are what results from an ICO or an intial coin offering for a new coin project.

Tokens are created and sold and they are called utitlity tokens.

They are not as good as cash but ther are useful and have utility in that they have future value to be used to buy something in that project…if its a game or metaverse project then maybe the tokens can buy a house or a game weapon or part of the company.

Governance has to do with the fact that since there is no central ruling body for crypto we are to believe that by having computers all over the world taking care of things that we are able to govern how things work in multiple places around the world.

So when you buy a lot of governance tokens you are able to make more votes on how you think things should be run with that particular crypto.

Security tokens relate to securities like stocks and bonds.

The story here is that these security tokens must be put under more investigation by the securities organizations and others who oversee financial transactions.

So at the beginning one of the key differences and benefits of Bitcoin was that they decided up front how many coins there would be and that there would never be more produced than that number.

Now certain tokens seem to have adjustable production numbers and was of micro splitting their tokens so that they can effectively make more.

Fiat or regular money was criticized because governments were just able to produce more when they saw fit.

(under construction Jan 3, 2022)