How many times speaking with someone about Blockchain we realized the confusion that might create this topic when comes to explain the differences between a coin, an altcoin, and a token. In this guide we are going to give more clarifications about the different views on this argument, trying to make it simple for you to explain it next time you talk about it.
Let’s start with understanding the definition of cryptocurrency. A cryptocurrency is a digital or virtual currency that is encrypted (secured) using cryptography.
Cryptography refers to the use of encryption techniques to secure and verify the transfer of transactions. Bitcoin is the first decentralized cryptocurrency, which is powered by a public and distributed ledger that records and validates all transactions chronologically, called the Blockchain.
Now let’s start with the different definitions:
- Coin: I will start with this one since it’s the oldest one. Bitcoin was the first coin to enter the blockchain era, to better say it was born at the same moment the blockchain technology was created since there is no decentralized blockchain without its correlated cryptocurrency, as it works as an incentive for the miners. The definition of “Coin”, at least the most used, is a cryptocurrency that possesses its own native blockchain and does not resides on the top of other hosting blockchains like Ethereum, Neo, EOS, and others. Examples of coins are Litecoin, Ethereum, DASH, Stellar, Monero, Cardano.
- Altcoin: This word stands for “Alternative Coin”. We said that Bitcoin was the first coin, therefore, all the other cryptocurrencies that were born after Bitcoin are called Altcoins. This is more a macro-group where reside also the “Tokens” and we can notice that when we hear about cryptocurrency in the news, we always see the “Bitcoin” movements and the “Altcoins” reaction to that. So, making it simple, when we talk about Altcoins, we are talking about all the Coins and Tokens outside Bitcoin (BTC).
- Token: A token is a cryptocurrency hosted on the top of other blockchains. As you know (if not check our guide on Smart Contracts) there are blockchains that allow you to create Smart Contracts on them, which subsequently can give life to dApps (Decentralised Applications). These “Hosting” blockchains allow you to make a cryptocurrency without having your own native blockchain but running on the hosting one. Nowadays many new projects are choosing such blockchains because it makes it easier and faster to make your own cryptocurrency instead building a blockchain from scratch with its correlated cryptocurrency. Examples of Tokens are all the ones that run on:
- Ethereum: This platform adopts the “ERC (Ethereum Request for Comments)” like ERC-20, ERC-223, etc.
- NEO: This platform adopts the “NEP (NEO Enhancement Proposal)” like NEP-5.
- Stellar Lumens: This platform adopts the “SCC (Stellar Smart Contract)”.
- EOS: This platform adopts the EOSIO.Token.
- Other examples of these kinds of platforms are WAVES, Cardano, LISK, Qtum etc.
Quick Tip: If you’re not sure which is a coin or which is a Token, on CoinMarketCap it tells you about it as you can see below:
By Marco Di Maio