Every crypto coin is on blockchain. A token is a cryptocurrency that does not have its own blockchain and instead uses the blockchain of another cryptocurrency.
Because it is significantly easier to establish a token than it is to produce a coin, there are far more frauds and shoddy enterprises employing tokens. That isn't to say that all tokens are bad investments or that all coins are valuable. There are numerous tokens with intriguing applications. Of fact, some crypto coins have no unique applications or competitive benefits.
Let's use Ethereum as an example to make things clearer. Ethereum is a blockchain, and Ether is the native coin of this blockchain. Ether is classified as a crypto coin because it has its own blockchain. One of Ethereum's distinguishing features was that it was the first programmable blockchain. Developers can use it to launch their own cryptocurrency because it's programmable. These coins are crypto tokens since they run on Ethereum's blockchain rather than their own (the official term for tokens built on Ethereum are ERC-20 tokens). This feature that it has programmable blockchain is also one of the reasons that it became second biggest crypto. Bitcoin, for example, the first cryptocurrency did not have this option.
Crypto tokens, like cryptocurrencies, are valuable assets. They're usually stored in blockchain wallets and can be transferred, exchanged, bought, and sold. A blockchain wallet is a software or hardware device for storing cryptocurrency. A crypto token's transactions are processed on the blockchain that it employs. For example, if the token is an ERC-20 token generated on Ethereum, all transactions for that token will be handled by the Ethereum blockchain.
Tokens enable developers to establish a cryptocurrency without the requirement to create a blockchain for it. This is significant because it accelerates, simplifies, and lowers the cost of generating cryptocurrencies. Blockchain development is a major technological task for developers who want to create their own cryptocurrency. A blockchain must be able to process transactions rapidly and efficiently at a cheap cost, as well as be resistant to attacks so that hackers cannot steal cryptocurrency.
The process does not finish with the creation of the blockchain. Validators are also required for a new crypto coin's transactions to be confirmed. People choose to become validators and give processing power to the blockchain because cryptocurrencies are decentralized.
Some of the biggest tokens, based on market capitalisation, are:
- USD Coin
- Wrapped UST token
- Shiba Inu
- Dai stablecoin
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