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Many of us have probably been using the terms ‘token’ and ‘coin’ interchangeably without realizing that there are minor but meaningful differences between them. It’s something we’re all fairly guilty of. But to get some clarity regarding the differences between Bitcoin and a token, we first need to understand the difference between a token and a conventional cryptocurrency as a whole.
While both of these terms are used to define a unit of blockchain value, they still refer to different categories of digital currencies. Let’s explore.
Coins
Digital coins are unique digital currencies that are based on their own standalone blockchains. In other words, a digital coin is an asset that is native to its own blockchain. Bitcoin (BTC) and Ether (ETH) are examples of such coins because they operate on the Bitcoin and Ethereum blockchains, respectively. These coins exist as data on the database (which is the blockchain), and any transactions are checked and verified by computers across the world.
Coins are used much like traditional money. They serve as a store of value, a medium of exchange, and a unit of account. However, certain digital coins like Ether, NEO, and DASH have additional features such as fuelling transactions, staking, and being allowed to vote on important decisions, respectively.
Tokens
Tokens are unlike coins in that they are created on top of existing blockchains. For example, the Ethereum platform remains one of the most common platforms for creating crypto tokens, and tokens built on Ethereum are known as ERC-20 tokens. ZRX, BAT, and GNT are some popular tokens existing on the Ethereum platform. Other such platforms include Stellar, NEO, Omni, and EOS.
An important distinction to be made here is that while coins mostly serve as a method of payment, tokens often exist to be used with dApps. They are mostly designed for specific applications and are used to activate features on the same. For example, using tokens to access games in a gaming dApp.
The Difference Between a Token and a Bitcoin
Now that we understand the difference between a digital coin and a token, it becomes far easier to understand how bitcoins are different from tokens. Much like coins, Bitcoin is a cryptocurrency (rather, the first cryptocurrency) that was built on the Bitcoin blockchain. Let’s explore the points of differences between the two.
- Bitcoin is an asset native to its blockchain, while tokens are built on existing blockchains.
- Bitcoin has monetary uses – it can be used as a store of value and a medium of exchange. It can also be used as a unit of account, which means that the things you buy can be priced in BTC too.
For example, the conversion from 1 BTC to INR is approximately 1453049 INR as of December 2020, and thus, the Bitcoin price in INR can be used to price various goods and services. Therefore, apart from monetary uses, Bitcoin does not have much use. It cannot be staked or used to gain access to a dApp.
Tokens, on the other hand, are created for different purposes altogether. These purposes can range from operating dApps, representing fractional ownership in a physical asset like real estate, voting rights when participating in governance, or even value-added services specific to brands (the WazirX token – WRX is a great example).
- Since tokens are created on existing blockchains, they are far easier to create as compared to Bitcoin. However, creating a token does require paying a fee via the native coins to the blockchain where the token is being created.
Conclusion
We’re seeing an interesting shift across the cryptocurrency sector has been the move towards Proof-of-Stake (PoS) consensus models.
Bitcoin relies on the Proof-of-Work (PoW) algorithm to validate transactions, involving ‘miners’ using high-end computing equipment to generate new bitcoins and secure the network. This has been termed by many in the community as an inefficient, resource-intensive method of running a blockchain network. Proof-of-Stake (Pos) does away with this approach and instead requires cryptocurrency holders to lock in their coins in the network to validate the transactions.
Most new cryptocurrencies being made are being offered as a token that is generated via the blockchain in this manner. Ethereum is by far the biggest brand on the PoS front. This makes Bitcoin particularly stand out when compared with tokens.
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Is Bitcoin Trading Is Legal In India?
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.
How To Convert Bitcoin To Cash?
There are many ways of converting Bitcoin to cash, such as crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, Peer to Peer Transactions. You can use cryptocurrency exchanges such as WazirX for this. Unlike typical ATMs, which allow you to withdraw money from your bank account, a Bitcoin ATM is a physical location where you may buy and sell Bitcoins using fiat currency. Several websites provide the option of selling Bitcoin in return for a prepaid debit card that may be used just like a standard debit card. You can sell Bitcoin for cash through a peer-to-peer platform in a faster and more anonymous manner.
How To Invest In Bitcoin?
Bitcoin may be invested in two ways: through mining or exchanges. Bitcoin mining is carried out by high-powered computers that solve challenging computational arithmetic problems that are too difficult to complete by hand and complex enough to tax even the most powerful computers. WazirX, a Bitcoin exchange, is another alternative.
How Can I Get Bitcoin?
To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process. Following that, you'll be sent to the Funds & Transfers section, where you can begin depositing Bitcoins into your wallet. You may also use INR to fund your WazirX Bitcoin wallet and then use it to purchase Bitcoin.
How Can I Convert Bitcoins To Cash?
Bitcoin may be converted to cash in various ways, including crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer to Peer Transactions. You may do this by using Bitcoin exchanges like WazirX. You may also sell Bitcoin for cash faster and more anonymously through a peer-to-peer marketplace.
How Does Bitcoin Work?
The blockchain, a distributed digital ledger, is what Bitcoin is based on. As the name suggests, blockchain is a linked database made up of blocks that store information about each transaction, such as the date and time, total amount, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological order to form a digital blockchain. Entries are linked in chronological order to form a digital blockchain. Blockchain is decentralized, which means any central authority does not control it.
How Does Bitcoin Technology Work?
The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.
How To Create Bitcoin Account?
Firstly, Go to the WazirX website and sign up. Then, a verification mail will be sent to you. The link sent via verification mail would be available only for a few seconds so make sure you click on the link sent to you as soon as possible, and it will verify your email address successfully. The next step is to set up security, so select the most suitable option for you. After you have set up the security, you will get a choice to either proceed further with or without completing the KYC procedure. After that, you will be directed to the Funds and Transfer page, where you could start depositing Bitcoins to your wallet. You can also deposit INR and then use it to buy Bitcoin for your WazirX Bitcoin wallet.
How Many Bitcoins Will Ever Be Created?
The source code of Bitcoin stipulates that it must have a restricted and finite quantity. As a result, only 21 million Bitcoins will ever be generated. These Bitcoins are added to the Bitcoin supply at a predetermined rate of one block every ten minutes on average. The supply of Bitcoins will be depleted once miners have unlocked this number of Bitcoins. It's possible, however, that the protocol for Bitcoin will be altered to allow for a higher suppl
Is Bitcoin Cash A Good Investment?
Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
