Coin VS Token: How Do They Differ?

Bitcoin. So, whether it be Ethereum, Cardano, or Shiba Inu, all of these would be called “altcoins”, since they are NOT Bitcoin. <em>Simple!</em></p>\n<p>With time, however, the cryptocurrency market EXPLODED - there are new coins and tokens coming into the market seemingly every single day! This is why, at some point in time, people started using the terms “altcoins”, “best altcoins”, and looking at “where can I buy altcoins?”, in reference to <strong>all of the different cryptocurrencies that are</strong> <strong>not the top-10 assets</strong> - Bitcoin, Ethereum, Ripple, and so on. So, in other words, if a coin or token isn’t in the top-10 list, it’s considered an “altcoin”.</p>\n<p>Not sure what’s the difference between crypto coins and tokens? Well, I have <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/coin-vs-token/">a dedicated section on this topic</strong></a> - make sure to check it out, and learn all of the essential differences!</p>\n<p>Going back to what are altcoins, you can look at it like this: imagine that a candy shop stocks a single chocolate bar brand. It’s the most popular brand, and has been around forever. With time, there are new brands of chocolate coming into the shop, and gaining popularity - some become super-popular, while others come and go. So, at some point, everyone will know all of the main, most popular brands - the first one, and then a few others, that have managed to gain popularity over the years -, while the rest of the chocolate bars will be viewed as “alternatives”.</p>\n<p>If you want to keep it simple, though, you may also view altcoins as <strong>“alternatives to Bitcoin”.</strong> So, whenever your friends say that they’re thinking about “investing in altcoins”, you will now know what they mean!</p>\n<p>Moving on, <strong>what are stablecoins?</strong> Well, they’re a really interesting concept. While they have been subject to a lot of controversy, as of late, it’s worth stating that the premise behind stablecoins is quite complicated, and can be tricky to truly comprehend!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoin pegged to fiat.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_02.o.jpg/" alt=\"What are stablecoins: Stablecoin pegged to fiat.\" width=\"1000\" height=\"772\" /></p>\n<p>So, how do stablecoins work? Well, a stablecoin is a cryptocurrency asset that is <strong>pegged to a fiat (or, governmental) currency</strong> - in most cases, this will be the Unites States dollar. Here, “pegged” means that the value of a single stablecoin is “tied” to the dollar - one stablecoin will <em>(theoretically) </em>always be worth one dollar <em>(or one unit of the currency that it’s pegged to)</em>.</p>\n<p>Following that, the term <strong>“backed”</strong> will always come up when talking about stablecoins, too. Put simply, this means that, for every stablecoin issued, there’s going to be some sort of an established asset to back it up <em>(most often, this would be the actual US dollar)</em>.</p>\n<p>So, think about it like this - imagine that you’ve decided to sell concert tickets. A person can come up to you, and purchase a ticket for $1. Now, for the sake of this example, let’s just say that, due to some unforeseen event, half of the ticket buyers decided not to go to the concert, and are asking for a refund.</p>\n<p>If you have all of the money that they’ve paid you for the ticket, and have used it to “back” the ticket purchases, you are able to issue refunds, no problem - if not, then suddenly, there’s no money for the customers to get back, and you start running into all sorts of problems!</p>\n<p><strong>In a very particular sense, the same sentiment is true with stablecoins.</strong> That is why all stablecoins need to be backed by governmental money, or some sort of a valuable, established asset. It’s also why there’s so much controversy in the world of crypto, regarding unbacked assets, and why people are questioning are stablecoins safe, to begin with.</p>\n<p>It’s worth mentioning here that stablecoins are also segmented into a few different categories, as well - the most well-known of which these days is <strong>“algo-”, or</strong> <strong>algorithmic stablecoins. </strong>It’s a complex topic that deserves a section of its own, but essentially, to put it short and simple, algo-stablecoins make use of special algorithms in order to keep their price stable. As you might have heard with the widespread news of the Terra Luna events, this type of stablecoins is yet to be widely successful.</p>\n<p>So, altcoins are all cryptocurrencies that are not Bitcoin, while stablecoins are special crypto assets that have their price pegged to a traditional currency, often the US dollar. <strong>What are wrapped coins, though?</strong></p>\n<p>To tell you the truth, wrapped coins are probably the most difficult to understand, if you’re just starting out with crypto! I’ll break things down as simple as possible, but do make sure to <strong>check out other sections in this Crypto 101 Handbook</strong>, so that you could get a better understanding of the topic, as a whole!</p>\n<p>Now, imagine that you want to send a couple of packages to two of your friends - one who lives in another city, and another who lives in a different country. You want to send two of them the same thing - say, custom-made cups that you’ve handcrafted yourself!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: An example with a tea cup.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_03.o.jpg/" alt=\"What are stablecoins: An example with a tea cup.\" width=\"1000\" height=\"727\" /></p>\n<p>When it comes to your friend from another city, the process of packing the cup is pretty simple - you place it in a box, stuff it with cushioning, wrap everything up, stick on a shipment sticker, and send it from the post office. <em>Simple!</em></p>\n<p>However, when it comes to your friend from the other country, <strong>things are a bit more complicated. </strong>Perhaps there are specific methods of how the cup needs to be wrapped and packaged? Maybe there are some very particular ways of how you need to write the address on the package? Also, what about the box itself - perhaps you need to use a very specific type of a box, too?</p>\n<p>All of that is to say - while you’re shipping the same item, to both of your friends, the packaging and transportation methods are going to be very different. In a way, this is kind of how wrapped coins work, too!</p>\n<p>Wrapped coins allow you to transact with some specific cryptocurrencies on platforms that would otherwise not support the original coins. <strong>A wrapped cryptocurrency is like a written IOU</strong> - it has the same qualities as the original crypto asset, follows the same price fluctuations, and can be exchanged for the original at any point in time.</p>\n<p>The simplest example here would be that of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, and the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/trust-wallet/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Trust cryptocurrency wallet</strong></a><strong>.</strong> Ethereum has a network of its own, while the Trust Wallet is based on a different network. So, in order to be able to keep ETH in your Trust Wallet, you need an equivalent - this is where <strong>WETH, or</strong> <strong>Wrapped Ethereum</strong> comes in!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: WETH.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_04.o.jpg/" alt=\"What are stablecoins: WETH.\" width=\"1000\" height=\"747\" /></p>\n<p>Admittedly, all of this isn’t all that easy to wrap your head around, no pun intended! That being said, as you start interacting with the cryptocurrency world, and encounter all of these aforementioned asset types, it will all start falling into place, surely!</p>\n<h2>Where are Altcoins, Stablecoins, and Wrapped Coins Used?</h2>\n<p>Up to this point, we’ve covered what are altcoins, stablecoins, and wrapped coins. Now, we definitely need to talk about <strong>where are all of these assets used</strong>, and why do they even exist, in the first place!</p>\n<p>Continuing with the same order of things, <strong>let’s start with altcoins.</strong> In all honesty, altcoins are really self-explanatory - it’s like asking <em>“what’s the point of all other cryptocurrencies, except for Bitcoin?”</em></p>\n<p>The best altcoins relate to the different crypto-powered projects, various investment strategies, and are the fundamental element of decentralized finance and the cryptocurrency industry, as a whole! If altcoins didn’t exist, you probably wouldn’t be reading this section, in the first place!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_05.o.jpg/" alt=\"What are stablecoins: Stablecoins.\" width=\"1000\" height=\"355\" /></p>\n<p><strong>Stablecoins are a bit more tricky.</strong> They are mostly used for three different purposes - providing liquidity to cryptocurrency projects, representing traditional assets on the blockchain, and being used as a tool to acquire other cryptocurrencies <em>(Bitcoin and altcoins)</em> quickly.</p>\n<p>All three of these use cases are super-important, and come with different pros and cons. For now, suffice to say that <strong>stablecoins help keep the cryptocurrency industry stable and liquid</strong>, and allow traders to invest in the market in a much simpler and more-straightforward manner.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Wrapped coins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_06.o.jpg/" alt=\"What are stablecoins: Wrapped coins.\" width=\"1000\" height=\"800\" /></p>\n<p>Now, as far as <strong>wrapped coins</strong> are concerned, I’ve kind of hinted towards their use case already, earlier in this section. These peculiar cryptocurrencies are used when you want to transact or store a specific crypto asset on a network or wallet that does not support that crypto. Thus, you “wrap” your coins, in a way that is supported by the network, and then are able to transact with it there.</p>\n<p>So, I’ve told you about altcoins, stablecoins, and wrapped coins. By now, you should have a pretty solid understanding of what each of these three terms mean, and where they are used, in general. However, don't hesitate to read other sections in this <strong>Crypto 101 Handbook</strong> to get more in-depth knowledge about the whole crypto world.</p>","meta_title":"What are Stablecoins, Altcoins, and Wrapped Coins?","meta_description":"Wondering what are stablecoins, altcoins, wrapped coins, or other types of coins? Figure out all differences and similarities right here!","meta_keywords":"what are stablecoins, what are altcoins, how do stablecoins work, altcoins to buy, stablecoins list, best altcoins\nwhere to buy altcoins, buying altcoins, altcoins with most potential, are stablecoins safe, altcoins definition, stablecoins explained, how many altcoins are there, crypto altcoins, where can i buy altcoins, what are wrapped coins","order":5,"language":"en","created_at":"2022-08-30T10:59:26.000000Z","updated_at":"2022-10-05T10:34:01.000000Z","modified_content":"<p>In this section, we’re going to talk about what are <strong>stablecoins, altcoins, and wrapped coins,</strong> and the differences between all of them!</p>\n<p>The cryptocurrency world is full of industry-specific jargon. There’s a huge number of different terms for you to figure out and understand, when you’re just starting out with your crypto journey!</p>\n<p>Many of these terms can get really confusing, and clamp up into one, huge mess. This is especially true when you consider all of the different cryptocurrency-related expressions and names! Well, today, <strong>I’m going to clear up some of that confusion for you.</strong></p>\n<p>In this section, we are going to talk about altcoins, stablecoins, and wrapped coins. First, I’ll tell you what each of these are, and give you some examples. Then, we’ll also discuss where are these crypto assets mainly used.</p>\n<p><em>So, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\"\n title=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: What are Stablecoins, Altcoins & Wrapped Coins?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"What are Stablecoins, Altcoins & Wrapped Coins?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"WPBXOviUIls\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What are Stablecoins, Altcoins & Wrapped Coins Explained!</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/WPBXOviUIls/hq720.jpg/"/n alt=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\"\n title=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"WPBXOviUIls\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What are Altcoins, Stablecoins, and Wrapped Coins?</h2>\n<p>To start things off, in order to understand these concepts better, we need to break down each of the terms, individually.</p>\n<p>The <strong>altcoin</strong> definition is, honestly, the simplest of the three, as far as understanding it goes. However, it’s also a term that has a lot of history, and has changed a bit, over the years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Altcoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_01.o.jpg/" alt=\"What are stablecoins: Altcoins.\" width=\"1000\" height=\"277\" /></p>\n<p>From the very origin of the term, “crypto altcoins” referred to <strong>all other cryptocurrencies that aren’t <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. So, whether it be Ethereum, Cardano, or Shiba Inu, all of these would be called “altcoins”, since they are NOT Bitcoin. <em>Simple!</em></p>\n<p>With time, however, the cryptocurrency market EXPLODED - there are new coins and tokens coming into the market seemingly every single day! This is why, at some point in time, people started using the terms “altcoins”, “best altcoins”, and looking at “where can I buy altcoins?”, in reference to <strong>all of the different cryptocurrencies that are</strong> <strong>not the top-10 assets</strong> - Bitcoin, Ethereum, Ripple, and so on. So, in other words, if a coin or token isn’t in the top-10 list, it’s considered an “altcoin”.</p>\n<p>Not sure what’s the difference between crypto coins and tokens? Well, I have <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/coin-vs-token/">a dedicated section on this topic</strong></a> - make sure to check it out, and learn all of the essential differences!</p>\n<p>Going back to what are altcoins, you can look at it like this: imagine that a candy shop stocks a single chocolate bar brand. It’s the most popular brand, and has been around forever. With time, there are new brands of chocolate coming into the shop, and gaining popularity - some become super-popular, while others come and go. So, at some point, everyone will know all of the main, most popular brands - the first one, and then a few others, that have managed to gain popularity over the years -, while the rest of the chocolate bars will be viewed as “alternatives”.</p>\n<p>If you want to keep it simple, though, you may also view altcoins as <strong>“alternatives to Bitcoin”.</strong> So, whenever your friends say that they’re thinking about “investing in altcoins”, you will now know what they mean!</p>\n<p>Moving on, <strong>what are stablecoins?</strong> Well, they’re a really interesting concept. While they have been subject to a lot of controversy, as of late, it’s worth stating that the premise behind stablecoins is quite complicated, and can be tricky to truly comprehend!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoin pegged to fiat.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_02.o.jpg/" alt=\"What are stablecoins: Stablecoin pegged to fiat.\" width=\"1000\" height=\"772\" /></p>\n<p>So, how do stablecoins work? Well, a stablecoin is a cryptocurrency asset that is <strong>pegged to a fiat (or, governmental) currency</strong> - in most cases, this will be the Unites States dollar. Here, “pegged” means that the value of a single stablecoin is “tied” to the dollar - one stablecoin will <em>(theoretically) </em>always be worth one dollar <em>(or one unit of the currency that it’s pegged to)</em>.</p>\n<p>Following that, the term <strong>“backed”</strong> will always come up when talking about stablecoins, too. Put simply, this means that, for every stablecoin issued, there’s going to be some sort of an established asset to back it up <em>(most often, this would be the actual US dollar)</em>.</p>\n<p>So, think about it like this - imagine that you’ve decided to sell concert tickets. A person can come up to you, and purchase a ticket for $1. Now, for the sake of this example, let’s just say that, due to some unforeseen event, half of the ticket buyers decided not to go to the concert, and are asking for a refund.</p>\n<p>If you have all of the money that they’ve paid you for the ticket, and have used it to “back” the ticket purchases, you are able to issue refunds, no problem - if not, then suddenly, there’s no money for the customers to get back, and you start running into all sorts of problems!</p>\n<p><strong>In a very particular sense, the same sentiment is true with stablecoins.</strong> That is why all stablecoins need to be backed by governmental money, or some sort of a valuable, established asset. It’s also why there’s so much controversy in the world of crypto, regarding unbacked assets, and why people are questioning are stablecoins safe, to begin with.</p>\n<p>It’s worth mentioning here that stablecoins are also segmented into a few different categories, as well - the most well-known of which these days is <strong>“algo-”, or</strong> <strong>algorithmic stablecoins. </strong>It’s a complex topic that deserves a section of its own, but essentially, to put it short and simple, algo-stablecoins make use of special algorithms in order to keep their price stable. As you might have heard with the widespread news of the Terra Luna events, this type of stablecoins is yet to be widely successful.</p>\n<p>So, altcoins are all cryptocurrencies that are not Bitcoin, while stablecoins are special crypto assets that have their price pegged to a traditional currency, often the US dollar. <strong>What are wrapped coins, though?</strong></p>\n<p>To tell you the truth, wrapped coins are probably the most difficult to understand, if you’re just starting out with crypto! I’ll break things down as simple as possible, but do make sure to <strong>check out other sections in this Crypto 101 Handbook</strong>, so that you could get a better understanding of the topic, as a whole!</p>\n<p>Now, imagine that you want to send a couple of packages to two of your friends - one who lives in another city, and another who lives in a different country. You want to send two of them the same thing - say, custom-made cups that you’ve handcrafted yourself!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: An example with a tea cup.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_03.o.jpg/" alt=\"What are stablecoins: An example with a tea cup.\" width=\"1000\" height=\"727\" /></p>\n<p>When it comes to your friend from another city, the process of packing the cup is pretty simple - you place it in a box, stuff it with cushioning, wrap everything up, stick on a shipment sticker, and send it from the post office. <em>Simple!</em></p>\n<p>However, when it comes to your friend from the other country, <strong>things are a bit more complicated. </strong>Perhaps there are specific methods of how the cup needs to be wrapped and packaged? Maybe there are some very particular ways of how you need to write the address on the package? Also, what about the box itself - perhaps you need to use a very specific type of a box, too?</p>\n<p>All of that is to say - while you’re shipping the same item, to both of your friends, the packaging and transportation methods are going to be very different. In a way, this is kind of how wrapped coins work, too!</p>\n<p>Wrapped coins allow you to transact with some specific cryptocurrencies on platforms that would otherwise not support the original coins. <strong>A wrapped cryptocurrency is like a written IOU</strong> - it has the same qualities as the original crypto asset, follows the same price fluctuations, and can be exchanged for the original at any point in time.</p>\n<p>The simplest example here would be that of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, and the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/trust-wallet/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Trust cryptocurrency wallet</strong></a><strong>.</strong> Ethereum has a network of its own, while the Trust Wallet is based on a different network. So, in order to be able to keep ETH in your Trust Wallet, you need an equivalent - this is where <strong>WETH, or</strong> <strong>Wrapped Ethereum</strong> comes in!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: WETH.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_04.o.jpg/" alt=\"What are stablecoins: WETH.\" width=\"1000\" height=\"747\" /></p>\n<p>Admittedly, all of this isn’t all that easy to wrap your head around, no pun intended! That being said, as you start interacting with the cryptocurrency world, and encounter all of these aforementioned asset types, it will all start falling into place, surely!</p>\n<h2>Where are Altcoins, Stablecoins, and Wrapped Coins Used?</h2>\n<p>Up to this point, we’ve covered what are altcoins, stablecoins, and wrapped coins. Now, we definitely need to talk about <strong>where are all of these assets used</strong>, and why do they even exist, in the first place!</p>\n<p>Continuing with the same order of things, <strong>let’s start with altcoins.</strong> In all honesty, altcoins are really self-explanatory - it’s like asking <em>“what’s the point of all other cryptocurrencies, except for Bitcoin?”</em></p>\n<p>The best altcoins relate to the different crypto-powered projects, various investment strategies, and are the fundamental element of decentralized finance and the cryptocurrency industry, as a whole! If altcoins didn’t exist, you probably wouldn’t be reading this section, in the first place!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_05.o.jpg/" alt=\"What are stablecoins: Stablecoins.\" width=\"1000\" height=\"355\" /></p>\n<p><strong>Stablecoins are a bit more tricky.</strong> They are mostly used for three different purposes - providing liquidity to cryptocurrency projects, representing traditional assets on the blockchain, and being used as a tool to acquire other cryptocurrencies <em>(Bitcoin and altcoins)</em> quickly.</p>\n<p>All three of these use cases are super-important, and come with different pros and cons. For now, suffice to say that <strong>stablecoins help keep the cryptocurrency industry stable and liquid</strong>, and allow traders to invest in the market in a much simpler and more-straightforward manner.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Wrapped coins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_06.o.jpg/" alt=\"What are stablecoins: Wrapped coins.\" width=\"1000\" height=\"800\" /></p>\n<p>Now, as far as <strong>wrapped coins</strong> are concerned, I’ve kind of hinted towards their use case already, earlier in this section. These peculiar cryptocurrencies are used when you want to transact or store a specific crypto asset on a network or wallet that does not support that crypto. Thus, you “wrap” your coins, in a way that is supported by the network, and then are able to transact with it there.</p>\n<p>So, I’ve told you about altcoins, stablecoins, and wrapped coins. By now, you should have a pretty solid understanding of what each of these three terms mean, and where they are used, in general. However, don't hesitate to read other sections in this <strong>Crypto 101 Handbook</strong> to get more in-depth knowledge about the whole crypto world.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-are-stablecoins","youtube_video":{"id":125,"channel_id":1,"sort":25,"video_title":"What are Stablecoins, Altcoins & Wrapped Coins Explained!","description":"What are altcoins, stablecoins, and wrapped coins in crypto?\n\nThere are multiple cryptocurrency asset types out there, on the market. All of these types have their own names, as well as some specific use cases where they can prove to be beneficial, or even essential. However, it’s very simple to get lost among the different types of assets - it can be overwhelming! \n\nIn this video, I will tell you about some of the main types of cryptocurrencies that you’ll likely encounter - altcoins, stablecoins, and wrapped coins. I will explain each of these types independently, and will also tell you about their main use cases, too.\n\nAre you a fan of altcoins? Perhaps you’ve already transacted with wrapped coins before? Share your experiences, in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What are Stablecoins, Altcoins, and Wrapped Coins\n0:56 What are Altcoins?\n2:38 What are Stablecoins?\n4:42 What are Wrapped Coins?\n6:52 Where are Altcoins, Stablecoins, and Wrapped Coins Used?\n8:12 Wrap-Up: What are Stablecoins, Altcoins, and Wrapped Coins?\n\nMore Related Videos:\n\n? Is Cryptocurrency a Good Investment?\nhttps://www.youtube.com/watch?v=cqVkgcEa5NI&t\n? How Does Cryptocurrency Work?\nhttps://www.youtube.com/watch?v=rAtJ7Lw90KA&t\n? What is Cryptocurrency?\nhttps://www.youtube.com/watch?v=eVLUrZtKhBk&t\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatAreStablecoins #WhatAreAltcoins #WhatAreWrappedCoins","video_id":"WPBXOviUIls","duration":535,"view_count":386,"thumbnail_url":"https://i.ytimg.com/vi/WPBXOviUIls/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-09-15 14:22:49","created_at":"2022-09-15T23:00:03.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"prevSection":{"id":35,"featured_image_id":7970,"original_id":null,"youtube_video_id":124,"author_id":42,"translator_id":null,"chapter_id":2,"title":"Is Cryptocurrency a Good Investment? The Pros & Cons","slug":"is-cryptocurrency-a-good-investment","definition":"Did you know that the Bitcoin price in 2009 was barely above zero? Nowadays, it costs thousands of dollars.","status":"published","content":"<p>In this section, we’re going to answer the question - <strong>is cryptocurrency a good investment?</strong></p>\n<p> </p>\n<p>If you’re reading this, it’s probably no secret that you’re interested in cryptocurrencies. As you should be - the crypto industry has seen some unparalleled growth over the past few years!</p>\n<p>That said, however, online, on social media platforms, there’s a constant mixture of good and bad news surrounding the crypto space. One day the market is experiencing unprecedented growth, while the other - everything’s crashing down rapidly! All of that might lead you to wonder - is crypto a good investment?</p>\n<p>In this section, <strong>we’re going to talk about</strong> <strong>investing in crypto.</strong> To be a bit more specific, we’ll address the questions of what’s the general appeal of crypto, to begin with, what are the pros and cons of investing in this industry, and wrap things up with a clear conclusion, too.</p>\n<p><em>Without further ado, let’s get to it!</em></p>\n<h2>What’s the Appeal of Investing in Crypto?</h2>\n<p>So, naturally, the first question that we should look into is this - what’s the actual appeal of investing in crypto, and why do so many people do it nowadays?</p>\n<p>Well, as you might probably expect, there isn’t a single answer to this question. Let’s still look at some of the more-common ones, however.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: What's the appeal of investing in crypto?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_01.o.jpg/" alt=\"Is cryptocurrency a good investment: What's the appeal of investing in crypto?\" width=\"1000\" height=\"393\" /></p>\n<p>First of all, cryptocurrencies are still relatively new. This opens them up to being <strong>a very speculatory asset class</strong> - no one really knows how much a crypto asset “should” be worth, and thus, there’s potentially some money to be made, if you’re lucky enough!</p>\n<p>Imagine it like this - let’s say that scientists have just discovered a new form of apples. These apples are super-healthy, juicy, delicious, and can stay fresh for a very long period of time. How much would an apple like that be worth?</p>\n<p>Well, straight off the bat, no one would know! Do these apples have any downsides? Are they rare, and difficult to grow, or maybe in a year or so, everyone will have this type of an apple tree in their garden? Again - there’s a lot of speculation involved, and the price of that apple might sway quite a bit!</p>\n<p>Same as with those apples, <strong>people love to speculate about certain cryptocurrencies</strong>, as well. Which of them will grow in price, and which will fall? How can you maximize your potential returns? These and many more questions lead people to wonder - is cryptocurrency a good investment?</p>\n<p>Another big reason why certain individuals might want to invest in the space is simply because <strong>it’s an innovation.</strong> As I’ve pointed out a few times already, crypto is still very new - as time goes on, though, it’s becoming increasingly more adopted, by the day. Some people might simply enjoy being “ahead of the curve”, and want to participate in this technological advancement, as early as possible.</p>\n<p>A common example here would be the internet, in the early 2000s. When it just came about, there were countless numbers of skeptics who thought that it’s just a fad, and that it would go away in a few months or years. Well, as you probably know, the reality is very different! Many people hope that the same will be true with crypto, too.</p>\n<p>There are multiple additional reasons for why individuals are wondering - is cryptocurrency a good investment? That being said, though, if you’re one of those people who strive to be an early investor, simply because you love the technology behind the concept, <strong>make sure to check out other sections on our Crypto 101 Handbook</strong> - there are countless sections about all-things-crypto, to help you understand the space better!</p>\n<h2>The Pros & Cons of Investing in Crypto</h2>\n<p>Moving on, let’s now take a look at some of the biggest pros and cons of investing in cryptocurrencies. Once you have them laid out clearly, in front of you, the decision will be much simpler to make!</p>\n<p><strong>Let’s start with the pros.</strong></p>\n<p>The very first benefit of investing in cryptocurrencies is the joint <strong>anonymity & transparency</strong> factor. When you invest in crypto, you are able to remain completely anonymous while doing so, if you wish to.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Anonymity & Transparency.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_02.o.jpg/" alt=\"Is cryptocurrency a good investment: Anonymity & Transparency.\" width=\"1000\" height=\"489\" /></p>\n<p>These days, with regulations getting stricter, it’s something that’s becoming increasingly more difficult to do. However, crypto enthusiasts still find ways to achieve at least partial <strong>anonymity</strong> - it all depends on just how far you’re willing to go!</p>\n<p><strong>Transparency</strong> is another key factor to consider, in that equation. Cryptocurrencies are based on blockchain technology, which is, by default, transparent. Unless we’re talking about some niche private blockchain, public ledgers will allow everyone to come in and check the code behind them, and search for various potential bugs and issues.</p>\n<p>All crypto transactions that are performed on such blockchains are public, as well. However, they won’t have your name attached to them - instead, only your <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-address/">wallet address</strong></a> will be shown to the observer, which does, once again, prove the anonymity aspect of the entire ordeal.</p>\n<p>If you’d like to learn more about how all of this works, you can check out the section on <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/decentralized-blockchain/">blockchain decentralization and anonymity</strong></a> - I go more in-depth into this topic there.</p>\n<p>Next up - <strong>the chance to earn huge returns on your investment.</strong></p>\n<p>Yes, this one’s a bit obvious, but it can still be considered somewhat of a benefit, or a “pro” of investing in crypto. That’s simply because there isn’t any other popular financial field that would allow you to earn such potential returns!</p>\n<p>A large part of the crypto appeal is the fact that this industry has managed to <strong>turn multiple people into millionaires, overnight.</strong> It’s like you playing in a lottery, but one that would allow you to increase and decrease your odds, depending on how well you’ve done your research.</p>\n<p>Of course, everything is never as simple as it seems, and there are huge downsides that accompany this factor, as well. We’ll talk about them later, though - for now, just keep in mind that many people would answer the question of “should you invest in crypto?” by giving you this very reason to do so - <strong>the potential for huge returns.</strong></p>\n<p>Moving on, another huge pro of investing in cryptocurrencies is the fact that, as I’ve pointed out earlier, there are seemingly <strong>countless ways to do so.</strong> And no, I’m not talking about using different exchange platforms to buy your crypto - instead, I’m referencing the variety of choices that this space houses.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Variety of choices.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_03.o.jpg/" alt=\"Is cryptocurrency a good investment: Variety of choices.\" width=\"1000\" height=\"539\" /></p>\n<p>If you want to take the “traditional” path, you COULD go ahead, register on an exchange, and purchase crypto this way. On the other hand, there’s also the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-is-defi/">DeFi (or, decentralized finance) space to explore, with all of the different services that it offers. Then, there are <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-nfts/">NFTs, which are a whole separate world, in of themselves.</p>\n<p><strong>These few categories then split off into a huge array of smaller subcategories</strong> - crypto borrowing and lending, advanced trading tools, royalty earnings with NFTs, different investment strategies, DAOs, and so on, and so forth. Each of these topics deserve a separate section of their own - I’ve already covered quite a few of them in our Crypto 101 Handbook, so don’t forget to check it out!</p>\n<p>One more huge “pro” of investing in cryptocurrencies is the fact that this financial field is often considered to be <strong>much more approachable than traditional finance</strong>, at least for the younger generation. That’s due to the fact that crypto is constantly popping up in various pop-culture events, especially when it comes to memes.</p>\n<p>Think about it yourself - Elon Musk and his support for Dogecoin, the surge of animal-themed coins and tokens, that whole situation with the WallStreetBets subreddit, and so on. Combine that with the fact that you can start investing in crypto with as little as a few dollars, and you can see why many people from the younger generation are wondering - <em>should I buy crypto?!</em></p>\n<p>With all of that being said, however, we couldn’t really finish off this section without talking about the negative aspects of investing in space, too. At the very top of these cons, you will find <strong>market volatility.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Market volatility.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_04.o.jpg/" alt=\"Is cryptocurrency a good investment: Market volatility.\" width=\"1000\" height=\"1067\" /></strong></p>\n<p>It’s something that I’ve explored earlier when talking about the appeal of crypto. Remember that example with the special apple? Well, sure - the price (or, worth) of that apple could go up, and make you a lot of money! However, it could also crash down, when you find out that all of your friends and neighbors have also acquired a huge amount of these apples.</p>\n<p>The same is true with crypto, as well. With it being so new and, frankly, still poorly regulated, <strong>no one really knows how much this technology is worth</strong>, and the speculatory nature of this ordeal can really put a dent in your wallet! Say, you decide to buy <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">BTC when it’s worth $60,000, only to find that it has crashed all the way down to $30,000 the next week. That’s not a nice feeling to experience, especially if you only wanted to make a bit of profit, and aren’t “in it” for the long run!</p>\n<p>Another big con that you should consider before investing in crypto is that this space is still <strong>not properly regulated</strong>, in most areas around the world. Governments are trying to change this, but these bureaucratic processes are usually very slow and tedious.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Poorly regulated.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_05.o.jpg/" alt=\"Is cryptocurrency a good investment: Poorly regulated.\" width=\"1000\" height=\"1045\" /></p>\n<p>Why does this matter? Well, <strong>it’s very easy to get scammed</strong>, or face tax-related issues when you’re dealing with an unregulated financial market. There are little-to-no fail-safes, and you become completely responsible for whatever happens to your assets. It requires a lot of knowledge and time in the market in order to make the smartest possible decisions!</p>\n<h2>Final Thoughts</h2>\n<p>To finish off, let’s wrap it up by stepping back, and taking a look at the question - <strong>should you invest in crypto?</strong></p>\n<p>Well, I believe that cryptocurrencies & crypto technology is a really cool innovation, and one that’s still very young. This means that there are going to be a lot of issues associated with it, and a lot of things that still need to be figured out. I mean, you could say that one of the cons of investing in crypto today is the fact that there are still very limited use cases for this technology!</p>\n<p>As time goes on, though, it’s obvious that crypto is becoming more and more adapted into our everyday lives. If you’re a fan of innovations, this is super-exciting! Whatever the case might be, however, and whatever you might decide to do, just keep in mind that, as of me writing this section, the space is still quite unpredictable, and <strong>you need to be very cautious with everything that you do!</strong></p>","meta_title":"Is Cryptocurrency a Good Investment? Pros, Cons, and Risks","meta_description":"Is Cryptocurrency a Good Investment? Read this and discover all the benefits, drawbacks, and dangers of investing in cryptocurrencies.","meta_keywords":"is cryptocurrency a good investment, is crypto a good investment, should i buy crypto, should you invest in crypto, how much should you invest in crypto, why you should invest in crypto, how to invest in cryptocurrency.","order":3,"language":"en","created_at":"2022-08-25T07:31:40.000000Z","updated_at":"2022-10-05T10:34:01.000000Z","modified_content":"<p>In this section, we’re going to answer the question - <strong>is cryptocurrency a good investment?</strong></p>\n<p> </p>\n<p>If you’re reading this, it’s probably no secret that you’re interested in cryptocurrencies. As you should be - the crypto industry has seen some unparalleled growth over the past few years!</p>\n<p>That said, however, online, on social media platforms, there’s a constant mixture of good and bad news surrounding the crypto space. One day the market is experiencing unprecedented growth, while the other - everything’s crashing down rapidly! All of that might lead you to wonder - is crypto a good investment?</p>\n<p>In this section, <strong>we’re going to talk about</strong> <strong>investing in crypto.</strong> To be a bit more specific, we’ll address the questions of what’s the general appeal of crypto, to begin with, what are the pros and cons of investing in this industry, and wrap things up with a clear conclusion, too.</p>\n<p><em>Without further ado, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"Is Cryptocurrency a Good Investment? (5 PROS & CONS!)\"\n title=\"Is Cryptocurrency a Good Investment? (5 PROS & CONS!)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Is Cryptocurrency a Good Investment? The Pros & Cons</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Is Cryptocurrency a Good Investment? The Pros & Cons\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"cqVkgcEa5NI\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">Is Cryptocurrency a Good Investment? (5 PROS & CONS!)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/cqVkgcEa5NI/hq720.jpg/"/n alt=\"Is Cryptocurrency a Good Investment? (5 PROS & CONS!)\"\n title=\"Is Cryptocurrency a Good Investment? (5 PROS & CONS!)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"Is Cryptocurrency a Good Investment? (5 PROS & CONS!)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"cqVkgcEa5NI\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What’s the Appeal of Investing in Crypto?</h2>\n<p>So, naturally, the first question that we should look into is this - what’s the actual appeal of investing in crypto, and why do so many people do it nowadays?</p>\n<p>Well, as you might probably expect, there isn’t a single answer to this question. Let’s still look at some of the more-common ones, however.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: What's the appeal of investing in crypto?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_01.o.jpg/" alt=\"Is cryptocurrency a good investment: What's the appeal of investing in crypto?\" width=\"1000\" height=\"393\" /></p>\n<p>First of all, cryptocurrencies are still relatively new. This opens them up to being <strong>a very speculatory asset class</strong> - no one really knows how much a crypto asset “should” be worth, and thus, there’s potentially some money to be made, if you’re lucky enough!</p>\n<p>Imagine it like this - let’s say that scientists have just discovered a new form of apples. These apples are super-healthy, juicy, delicious, and can stay fresh for a very long period of time. How much would an apple like that be worth?</p>\n<p>Well, straight off the bat, no one would know! Do these apples have any downsides? Are they rare, and difficult to grow, or maybe in a year or so, everyone will have this type of an apple tree in their garden? Again - there’s a lot of speculation involved, and the price of that apple might sway quite a bit!</p>\n<p>Same as with those apples, <strong>people love to speculate about certain cryptocurrencies</strong>, as well. Which of them will grow in price, and which will fall? How can you maximize your potential returns? These and many more questions lead people to wonder - is cryptocurrency a good investment?</p>\n<p>Another big reason why certain individuals might want to invest in the space is simply because <strong>it’s an innovation.</strong> As I’ve pointed out a few times already, crypto is still very new - as time goes on, though, it’s becoming increasingly more adopted, by the day. Some people might simply enjoy being “ahead of the curve”, and want to participate in this technological advancement, as early as possible.</p>\n<p>A common example here would be the internet, in the early 2000s. When it just came about, there were countless numbers of skeptics who thought that it’s just a fad, and that it would go away in a few months or years. Well, as you probably know, the reality is very different! Many people hope that the same will be true with crypto, too.</p>\n<p>There are multiple additional reasons for why individuals are wondering - is cryptocurrency a good investment? That being said, though, if you’re one of those people who strive to be an early investor, simply because you love the technology behind the concept, <strong>make sure to check out other sections on our Crypto 101 Handbook</strong> - there are countless sections about all-things-crypto, to help you understand the space better!</p>\n<h2>The Pros & Cons of Investing in Crypto</h2>\n<p>Moving on, let’s now take a look at some of the biggest pros and cons of investing in cryptocurrencies. Once you have them laid out clearly, in front of you, the decision will be much simpler to make!</p>\n<p><strong>Let’s start with the pros.</strong></p>\n<p>The very first benefit of investing in cryptocurrencies is the joint <strong>anonymity & transparency</strong> factor. When you invest in crypto, you are able to remain completely anonymous while doing so, if you wish to.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Anonymity & Transparency.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_02.o.jpg/" alt=\"Is cryptocurrency a good investment: Anonymity & Transparency.\" width=\"1000\" height=\"489\" /></p>\n<p>These days, with regulations getting stricter, it’s something that’s becoming increasingly more difficult to do. However, crypto enthusiasts still find ways to achieve at least partial <strong>anonymity</strong> - it all depends on just how far you’re willing to go!</p>\n<p><strong>Transparency</strong> is another key factor to consider, in that equation. Cryptocurrencies are based on blockchain technology, which is, by default, transparent. Unless we’re talking about some niche private blockchain, public ledgers will allow everyone to come in and check the code behind them, and search for various potential bugs and issues.</p>\n<p>All crypto transactions that are performed on such blockchains are public, as well. However, they won’t have your name attached to them - instead, only your <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-address/">wallet address</strong></a> will be shown to the observer, which does, once again, prove the anonymity aspect of the entire ordeal.</p>\n<p>If you’d like to learn more about how all of this works, you can check out the section on <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/decentralized-blockchain/">blockchain decentralization and anonymity</strong></a> - I go more in-depth into this topic there.</p>\n<p>Next up - <strong>the chance to earn huge returns on your investment.</strong></p>\n<p>Yes, this one’s a bit obvious, but it can still be considered somewhat of a benefit, or a “pro” of investing in crypto. That’s simply because there isn’t any other popular financial field that would allow you to earn such potential returns!</p>\n<p>A large part of the crypto appeal is the fact that this industry has managed to <strong>turn multiple people into millionaires, overnight.</strong> It’s like you playing in a lottery, but one that would allow you to increase and decrease your odds, depending on how well you’ve done your research.</p>\n<p>Of course, everything is never as simple as it seems, and there are huge downsides that accompany this factor, as well. We’ll talk about them later, though - for now, just keep in mind that many people would answer the question of “should you invest in crypto?” by giving you this very reason to do so - <strong>the potential for huge returns.</strong></p>\n<p>Moving on, another huge pro of investing in cryptocurrencies is the fact that, as I’ve pointed out earlier, there are seemingly <strong>countless ways to do so.</strong> And no, I’m not talking about using different exchange platforms to buy your crypto - instead, I’m referencing the variety of choices that this space houses.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Variety of choices.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_03.o.jpg/" alt=\"Is cryptocurrency a good investment: Variety of choices.\" width=\"1000\" height=\"539\" /></p>\n<p>If you want to take the “traditional” path, you COULD go ahead, register on an exchange, and purchase crypto this way. On the other hand, there’s also the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-is-defi/">DeFi (or, decentralized finance) space to explore, with all of the different services that it offers. Then, there are <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-nfts/">NFTs, which are a whole separate world, in of themselves.</p>\n<p><strong>These few categories then split off into a huge array of smaller subcategories</strong> - crypto borrowing and lending, advanced trading tools, royalty earnings with NFTs, different investment strategies, DAOs, and so on, and so forth. Each of these topics deserve a separate section of their own - I’ve already covered quite a few of them in our Crypto 101 Handbook, so don’t forget to check it out!</p>\n<p>One more huge “pro” of investing in cryptocurrencies is the fact that this financial field is often considered to be <strong>much more approachable than traditional finance</strong>, at least for the younger generation. That’s due to the fact that crypto is constantly popping up in various pop-culture events, especially when it comes to memes.</p>\n<p>Think about it yourself - Elon Musk and his support for Dogecoin, the surge of animal-themed coins and tokens, that whole situation with the WallStreetBets subreddit, and so on. Combine that with the fact that you can start investing in crypto with as little as a few dollars, and you can see why many people from the younger generation are wondering - <em>should I buy crypto?!</em></p>\n<p>With all of that being said, however, we couldn’t really finish off this section without talking about the negative aspects of investing in space, too. At the very top of these cons, you will find <strong>market volatility.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Market volatility.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_04.o.jpg/" alt=\"Is cryptocurrency a good investment: Market volatility.\" width=\"1000\" height=\"1067\" /></strong></p>\n<p>It’s something that I’ve explored earlier when talking about the appeal of crypto. Remember that example with the special apple? Well, sure - the price (or, worth) of that apple could go up, and make you a lot of money! However, it could also crash down, when you find out that all of your friends and neighbors have also acquired a huge amount of these apples.</p>\n<p>The same is true with crypto, as well. With it being so new and, frankly, still poorly regulated, <strong>no one really knows how much this technology is worth</strong>, and the speculatory nature of this ordeal can really put a dent in your wallet! Say, you decide to buy <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">BTC when it’s worth $60,000, only to find that it has crashed all the way down to $30,000 the next week. That’s not a nice feeling to experience, especially if you only wanted to make a bit of profit, and aren’t “in it” for the long run!</p>\n<p>Another big con that you should consider before investing in crypto is that this space is still <strong>not properly regulated</strong>, in most areas around the world. Governments are trying to change this, but these bureaucratic processes are usually very slow and tedious.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Is cryptocurrency a good investment: Poorly regulated.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/should_you_invest_in_crypto_05.o.jpg/" alt=\"Is cryptocurrency a good investment: Poorly regulated.\" width=\"1000\" height=\"1045\" /></p>\n<p>Why does this matter? Well, <strong>it’s very easy to get scammed</strong>, or face tax-related issues when you’re dealing with an unregulated financial market. There are little-to-no fail-safes, and you become completely responsible for whatever happens to your assets. It requires a lot of knowledge and time in the market in order to make the smartest possible decisions!</p>\n<h2>Final Thoughts</h2>\n<p>To finish off, let’s wrap it up by stepping back, and taking a look at the question - <strong>should you invest in crypto?</strong></p>\n<p>Well, I believe that cryptocurrencies & crypto technology is a really cool innovation, and one that’s still very young. This means that there are going to be a lot of issues associated with it, and a lot of things that still need to be figured out. I mean, you could say that one of the cons of investing in crypto today is the fact that there are still very limited use cases for this technology!</p>\n<p>As time goes on, though, it’s obvious that crypto is becoming more and more adapted into our everyday lives. If you’re a fan of innovations, this is super-exciting! Whatever the case might be, however, and whatever you might decide to do, just keep in mind that, as of me writing this section, the space is still quite unpredictable, and <strong>you need to be very cautious with everything that you do!</strong></p>","preview_url":"https://www.bitdegree.org/crypto/learn/is-cryptocurrency-a-good-investment","youtube_video":{"id":124,"channel_id":1,"sort":26,"video_title":"Is Cryptocurrency a Good Investment? (5 PROS & CONS!)","description":"Is cryptocurrency a good investment, and what are the pros & cons of doing it?\n\nWith cryptocurrencies becoming as popular as they are, it’s no wonder that more and more people ask - is crypto a good investment? Additionally, what about the pros and cons associated with this activity - which outweighs which?\n\nIn this video, I’ll be addressing all of those questions, and a couple more. I will tell you about what makes crypto such an appealing field for investors, as well as cover some of the biggest benefits and shortcomings of this particular financial market.\n\nDo you think investing in crypto is worth it? Or are you someone who stays away from doing it? Share your opinions, in the comments below!\n\nVideo Time Table:\n\n0:00 Introduction to Is Cryptocurrency a Good Investment\n0:59 What's the Appeal of Investing in Crypto?\n3:07 The Pros & Cons of Investing in Crypto\n08:03 Wrap-up: Is Cryptocurrency a Good Investment?\n\nMore Related Videos:\n\n? How to Avoid Rug Pulls in Crypto?\nhttps://www.youtube.com/watch?v=tNPU6AY4o74\n? How to Get Free Crypto?\nhttps://www.youtube.com/watch?v=aNjehGx3WqM\n? How to Avoid Crypto Taxes?\nhttps://www.youtube.com/watch?v=ERzU_Xz_P-o\n? What Does Staking Mean in Crypto?\nhttps://www.youtube.com/watch?v=irhlfrCrywo \n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#IsCryptocurrencyaGoodInvestment #IsCryptoaGoodInvestment #ShouldIBuyCrypto","video_id":"cqVkgcEa5NI","duration":543,"view_count":305,"thumbnail_url":"https://i.ytimg.com/vi/cqVkgcEa5NI/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-09-08 15:03:30","created_at":"2022-09-08T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"chapterTitle":"Cryptocurrencies","cryptoBookSection":{"id":6,"featured_image_id":6414,"original_id":null,"youtube_video_id":8,"author_id":42,"translator_id":null,"chapter_id":2,"title":"Coin VS Token: How Do They Differ?","slug":"coin-vs-token","definition":"Did you know that, as of 2022, there are nearly over 10,000 digital coins out there?","status":"published","content":"<p>In this section, I’ll explain the <strong>differences between <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-coin/">crypto coins</a> VS <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-token/">tokens.
/n
Imagine that you’ve decided to start working out. While planning out your routine, you’ve come to a crossroads - should you purchase your own equipment, or sign up for a gym membership?</p>\n<p>Both positions have their own pros and cons. If you were to buy your own training equipment, this would allow you to be independent, and train whenever you’d like. On the other hand, it would cost a lot of money and would require you to build a mini gym for yourself all on your own. These are the issues that would be avoided by buying a gym membership.</p>\n<p>So, this example illustrates the <strong>relationship between crypto coins and tokens</strong> perfectly with their cons and pros equally.</p>\n<p>In this section, we’re comparing crypto coins VS tokens. To be more specific, we’ll talk about what these two assets are, what are their main differences, and why this is something that you should know about, in the first place.</p>\n<p><em>Ready? Let’s get right to it!</em></p>\n<h2>What are Crypto Coins and Tokens?</h2>\n<p>To start things off, before we can really get into the comparison between crypto coins and tokens, we do need to figure out what these two assets are, in the first place.</p>\n<p>Some of the most popular examples of <strong>crypto coins</strong> include <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/binance/">Binance Coin</strong></a>. In other words, they are popular and very large crypto assets that have some sort of a broad function associated with them.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-1.o.jpg/" alt=\"Coin vs token: Most popular crypto assets vs smaller crypto assets.\" width=\"801\" height=\"502\" /></p>\n<p><strong>Tokens</strong>, on the other hand, are <strong>smaller crypto assets</strong> that usually serve a much more niche and specific purpose than coins. On top of that, tokens can’t exist on their own - instead, they are “hosted” on the <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain of a crypto coin. So, you could say that tokens as so-called child coins that are based on the big environments of parent coins.</p>\n<p>Here, it’s also worth mentioning that the term “cryptocurrency” can refer to both coins and tokens - it’s situation-dependent! So, to make it clear here is an example for you: </p>\n<p>Imagine if coins are visualized as operating systems on your computer (Microsoft, Windows, or Apple's macOS), then crypto tokens are the programs that you launch in those Windows or macOS environments. Still, Microsoft Windows as a parent software can run without any additional programs, but with extra child apps, let's say Chrome internet browser, Microsoft Office package, and Cyberpunk game, it is more versatile and fun. <em>Simple enough, isn’t it?</em></p>\n<p><em><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-2.o.jpg/" alt=\"Coin vs token: An example with an operating system.\" width=\"800\" height=\"527\" /></em></p>\n<p>Now, a blockchain is a place where data, or information, is stored. I won’t go into detail on the topic in this section, but if you’re really interested to learn more about it, you can check out the section \"<a href=https://www.bitdegree.org/"/crypto/learn/what-is-blockchain/">What is the Blockchain?</strong></a>\".</p>\n<p>That being said, let’s reiterate the earlier point - crypto coins have <strong>their own blockchains</strong>, while crypto tokens are hosted on <strong>already-existing blockchains of the coins</strong>. In other words, tokens DO NOT have a blockchain of their own but they are children of bigger parents - coins, and they use their parents’ blockchain to launch and operate themself!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-3.o.jpg/" alt=\"Coin vs token: Tokens are children of bigger parent coins.\" width=\"839\" height=\"281\" /></p>\n<p>Another way you can look at it is via the example I’ve given at the beginning of this section. If you want to start working out and want to build a miniature gym of your own (with your own equipment, that is), you will be investing money, time, and a lot of patience. This is the same as when developing a new cryptocurrency - the developers must code the entire logic and functionality model of the brand new blockchain behind their future coin.</p>\n<p>Sticking with this example, taking out a local gym membership will save you both money and a lot of time, as well. Thus, creating a token on an existing blockchain environment is much easier - no matter what sort of a function it will serve, the core, underlying logic behind it will still be that of the blockchain that it’s built on.</p>\n<p>When discussing crypto coins and tokens, your best bet would be to think about <strong>Ethereum</strong>. It’s the second-largest crypto project in the world, right after <strong>Bitcoin</strong>, and is often referred to as the “<strong>global computer</strong>”.</p>\n<p>The <strong>vast majority of all tokens </strong>on the current market are developed, created, and launched on the <strong>Ethereum blockchain</strong>. Without getting too technical, the main reason why this is the case is that Ethereum provides probably the best and easiest environment for token launch and it was the first highly adopted coin with such a smart blockchain environment that supports this functionality.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-4.o.jpg/" alt=\"Coin vs token: What are crypto coins and tokens?\" width=\"801\" height=\"520\" /></p>\n<p>Returning back, a great example of the more well-known Ethereum-based tokens would be, the so-called, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-stablecoin/">stablecoins. And yes, it sounds weird, but this is the one and only situation when tokens are called coins, even if they are still created on a parent blockchain of Ethereum, and not on their own. But they are the special ones, and here is why!</p>\n<p>A stablecoin is a type of crypto token whose price is “pegged” (or tied) to the value of the dollar, and which is backed by actual dollars, as well. In other words, <strong>one stablecoin will always be worth one dollar</strong>. It’s like a virtual US dollar in a blockchain with always the same value of the tangible US dollar in real life.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-5.o.jpg/" alt=\"Coin vs token: Ethereum-based tokens.\" width=\"800\" height=\"747\" /></p>\n<p>To get a broader picture, the most popular stablecoin today is <strong><a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-tether-usdt/">USDT <strong>(Tether)</strong></a>. Tether is HUGE. As of writing this section, it’s the third-largest crypto asset, right after Bitcoin and Ethereum, and it possesses a <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-market-capitalization-market-cap-mcap/">market capitalization</a> of over $78 billion</strong>. In addition, as I mentioned before, one Tether will always be worth one US dollar in value and will never change. </p>\n<p><em>If Tether is so incredibly huge, then why doesn’t it have a blockchain of its own?</em></p>\n<p>Once again, this is because of just how good Ethereum is when it comes to launching such crypto assets as stablecoins or any other types of tokens. The team behind Ethereum is constantly improving the technology, and making it easier, universal, and faster for developers to create and deploy tokens on the ETH blockchain.</p>\n<p>Developers of new tokens don’t really need to think about building their own blockchain environment from scratch, they get fully universal functionality of Ethereum, all pre-ready in the box.</p>\n<h2>What are the Differences Between Coins and Tokens?</h2>\n<p>Continuing on with this chapter, we’ve established what crypto coins and tokens are. Now, what are the actual differences between these two?</p>\n<p>Well, the biggest difference is just that - while crypto coins have blockchains of their own, tokens use the blockchains of existing coins. Though it’s worth mentioning that <strong>NOT ALL blockchains</strong> allow for tokens to be created on them!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-6.o.jpg/" alt=\"Coin vs token: Differences between coins and tokens.\" width=\"800\" height=\"239\" /></p>\n<p>Think about it this way - imagine that each crypto coin is some sort of a building. There are bigger buildings, smaller buildings, and so on. All of them serve different functions and have different features, right?</p>\n<p>For example, some buildings have large garages where you can store a lot of cars. Then there are small buildings (for example, private houses) that might not have a designated place for a car, in general!</p>\n<p>Well, in this case, let’s imagine that <strong>crypto tokens would actually be the cars</strong> that can be stored (or not) next to the buildings in the virtual city we just mentioned.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-7.o.jpg/" alt=\"Coin vs token: An example with a car.\" width=\"801\" height=\"433\" /></p>\n<p>In the same manner, some crypto coin blockchains allow developers to create tokens on them, while others do not. </p>\n<p><em>Why? </em>Because coin developers simply designed their blockchains that way, just to serve different purposes. Some coins were built with the intention just to <strong>serve their own mission</strong>. For example, Bitcoin was designed to just be the money equivalent in the virtual world and that’s it.</p>\n<p>On the opposite side, other coins were designed to serve not just their own, but additional features, by sharing their own functionality with tokens that could be launched and function in accordance with the parent coin on which those blockchain tokens were launched.</p>\n<p>The most popular blockchains for token creation are <strong>Ethereum</strong>, the <strong>Binance Smart Chain</strong>, and <strong>TRON</strong>.</p>\n<p>Another big difference between coins and tokens is that coins usually serve a larger purpose, and are more general in their use, while token utility concentrates on specific projects.</p>\n<p><em>Sounds confusing? </em>Allow me to give you a few examples.</p>\n<p>Let’s take <strong>Bitcoin</strong> and the <strong>Uniswap token</strong>. Bitcoin is the largest cryptocurrency on the market. Most people agree that its use case is that of a “store of value”. Meaning that people invest in Bitcoin with the hope that their investments will grow in value, or at least that their money will retain its value.</p>\n<p><em>A very general and broad use case, wouldn’t you agree?</em></p>\n<p><em><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-8.o.jpg/" alt=\"Coin vs token: Store of value.\" width=\"800\" height=\"446\" /></em></p>\n<p>Now, the Uniswap token is a token of the most popular decentralized crypto exchange, <strong>Uniswap</strong>. The exchange allows you to trade one type of Ethereum token for another, in an anonymous manner, and without any official company overseeing the process (thus, it’s decentralized). The Uniswap token, however, isn’t required for those trades.</p>\n<p><em>So… What is it even used for, then?</em></p>\n<p>Well, Uniswap token holders will be able to <strong>vote for changes and upgrades</strong> made to the exchange in question and might receive some discounts when swapping other tokens on the platform. Here, the use case of the Uniswap token is very niche and related strictly to the decentralized exchange platform.</p>\n<p>Another great example would be the earlier-mentioned <strong>Ethereum coin</strong>, and its well-known token called <strong>Shiba Inu</strong>. Ethereum blockchain allows developers to create crypto projects in a fast and efficient manner, by using special Ethereum features such as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a>.</p>\n<p>Smart contracts are basically automated agreements between two or more parties. I won’t go too in-depth into the topic, but if you’re interested to learn more about it, you can check out the section \"<a href=https://www.bitdegree.org/"/crypto/learn/what-are-smart-contracts/">What are Smart Contracts?</strong></a>\". For now, it should suffice to say that smart contracts are an essential part of the Ethereum network.</p>\n<p><img title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-9.o.jpg/" alt=\"Coin vs token: Shiba Inu token.\" width=\"800\" height=\"438\" />Essentially, Ethereum is used as a launchpad for other projects - it’s like a computer that you run programs on. The Shiba Inu token, on the other hand, would be one of these programs - a token of the Ethereum.</p>\n<p>It was created on the Ethereum blockchain and this means that Shiba Inu has all of the <strong>fundamental characteristics of the Ethereum blockchain </strong>and it works in accordance with the logic of this network. However, you might wonder - <em>what’s the purpose of this token?</em></p>\n<p>Well, Shiba Inu was created as something that’s known as a “meme token”. Essentially, it has no single, clear purpose, and is mostly used for investment and meme purposes. Nowadays, you may also use Shiba Inu to donate to certain animal charities. In addition, there’s artwork being created that’s inspired by the project, but once again, its uses are very niche.</p>\n<h2>Why Do the Differences Between Coins and Tokens Matter?</h2>\n<p>Moving on, we’ve now covered what are crypto coins and tokens, and how they’re different from one another. The last thing that we need to discuss in this section is the question of why these things should even matter to you, in the first place!</p>\n<p>As you might have gathered already, coins and tokens are very different in how they work. Thus, anyone who is interested in crypto <strong>should be able to differentiate</strong> between the two. It’s one of the biggest questions in crypto.</p>\n<p>However, to tell you my honest opinion, apart from being savvy about the topic and understanding how crypto works, you aren’t really going to need to know the specific differences between coins and tokens, especially if you’re simply investing in or trading crypto.</p>\n<p>Sure, depending on if it's a coin or a token, the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transaction-fee/">transaction fees</strong></a> are going to be different, and the logic behind the project will possess different features and quirks, too. But, to your average investor, this usually does not matter. Instead, people look into the ACTUAL PROJECTS, and their value proposition - not if it’s a coin or a token.</p>","meta_title":"Coin VS Token: How Do They Differ?","meta_description":"Trying to figure out the difference between coins vs tokens? You'll surely find a detailed answer to this question with examples right here!","meta_keywords":"coin vs token, token vs coin crypto, coin vs token cryptocurrency, difference between token and coin crypto, what is the difference between tokens and coins in cryptocurrency","order":4,"language":"en","created_at":"2022-05-02T11:41:38.000000Z","updated_at":"2022-10-17T07:07:57.000000Z","modified_content":"<p>In this section, I’ll explain the <strong>differences between <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-coin/">crypto coins</a> VS <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-token/">tokens.
/n
Imagine that you’ve decided to start working out. While planning out your routine, you’ve come to a crossroads - should you purchase your own equipment, or sign up for a gym membership?</p>\n<p>Both positions have their own pros and cons. If you were to buy your own training equipment, this would allow you to be independent, and train whenever you’d like. On the other hand, it would cost a lot of money and would require you to build a mini gym for yourself all on your own. These are the issues that would be avoided by buying a gym membership.</p>\n<p>So, this example illustrates the <strong>relationship between crypto coins and tokens</strong> perfectly with their cons and pros equally.</p>\n<p>In this section, we’re comparing crypto coins VS tokens. To be more specific, we’ll talk about what these two assets are, what are their main differences, and why this is something that you should know about, in the first place.</p>\n<p><em>Ready? Let’s get right to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"Crypto Token VS Coin (Animated Explainer & Examples)\"\n title=\"Crypto Token VS Coin (Animated Explainer & Examples)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Coin VS Token: How Do They Differ?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Coin VS Token: How Do They Differ?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"kNAC7CXFOTw\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">Crypto Token VS Coin (Animated Explainer & Examples)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/kNAC7CXFOTw/hq720.jpg/"/n alt=\"Crypto Token VS Coin (Animated Explainer & Examples)\"\n title=\"Crypto Token VS Coin (Animated Explainer & Examples)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"Crypto Token VS Coin (Animated Explainer & Examples)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"kNAC7CXFOTw\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What are Crypto Coins and Tokens?</h2>\n<p>To start things off, before we can really get into the comparison between crypto coins and tokens, we do need to figure out what these two assets are, in the first place.</p>\n<p>Some of the most popular examples of <strong>crypto coins</strong> include <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/binance/">Binance Coin</strong></a>. In other words, they are popular and very large crypto assets that have some sort of a broad function associated with them.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-1.o.jpg/" alt=\"Coin vs token: Most popular crypto assets vs smaller crypto assets.\" width=\"801\" height=\"502\" /></p>\n<p><strong>Tokens</strong>, on the other hand, are <strong>smaller crypto assets</strong> that usually serve a much more niche and specific purpose than coins. On top of that, tokens can’t exist on their own - instead, they are “hosted” on the <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain of a crypto coin. So, you could say that tokens as so-called child coins that are based on the big environments of parent coins.</p>\n<p>Here, it’s also worth mentioning that the term “cryptocurrency” can refer to both coins and tokens - it’s situation-dependent! So, to make it clear here is an example for you: </p>\n<p>Imagine if coins are visualized as operating systems on your computer (Microsoft, Windows, or Apple's macOS), then crypto tokens are the programs that you launch in those Windows or macOS environments. Still, Microsoft Windows as a parent software can run without any additional programs, but with extra child apps, let's say Chrome internet browser, Microsoft Office package, and Cyberpunk game, it is more versatile and fun. <em>Simple enough, isn’t it?</em></p>\n<p><em><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-2.o.jpg/" alt=\"Coin vs token: An example with an operating system.\" width=\"800\" height=\"527\" /></em></p>\n<p>Now, a blockchain is a place where data, or information, is stored. I won’t go into detail on the topic in this section, but if you’re really interested to learn more about it, you can check out the section \"<a href=https://www.bitdegree.org/"/crypto/learn/what-is-blockchain/">What is the Blockchain?</strong></a>\".</p>\n<p>That being said, let’s reiterate the earlier point - crypto coins have <strong>their own blockchains</strong>, while crypto tokens are hosted on <strong>already-existing blockchains of the coins</strong>. In other words, tokens DO NOT have a blockchain of their own but they are children of bigger parents - coins, and they use their parents’ blockchain to launch and operate themself!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-3.o.jpg/" alt=\"Coin vs token: Tokens are children of bigger parent coins.\" width=\"839\" height=\"281\" /></p>\n<p>Another way you can look at it is via the example I’ve given at the beginning of this section. If you want to start working out and want to build a miniature gym of your own (with your own equipment, that is), you will be investing money, time, and a lot of patience. This is the same as when developing a new cryptocurrency - the developers must code the entire logic and functionality model of the brand new blockchain behind their future coin.</p>\n<p>Sticking with this example, taking out a local gym membership will save you both money and a lot of time, as well. Thus, creating a token on an existing blockchain environment is much easier - no matter what sort of a function it will serve, the core, underlying logic behind it will still be that of the blockchain that it’s built on.</p>\n<p>When discussing crypto coins and tokens, your best bet would be to think about <strong>Ethereum</strong>. It’s the second-largest crypto project in the world, right after <strong>Bitcoin</strong>, and is often referred to as the “<strong>global computer</strong>”.</p>\n<p>The <strong>vast majority of all tokens </strong>on the current market are developed, created, and launched on the <strong>Ethereum blockchain</strong>. Without getting too technical, the main reason why this is the case is that Ethereum provides probably the best and easiest environment for token launch and it was the first highly adopted coin with such a smart blockchain environment that supports this functionality.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-4.o.jpg/" alt=\"Coin vs token: What are crypto coins and tokens?\" width=\"801\" height=\"520\" /></p>\n<p>Returning back, a great example of the more well-known Ethereum-based tokens would be, the so-called, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-stablecoin/">stablecoins. And yes, it sounds weird, but this is the one and only situation when tokens are called coins, even if they are still created on a parent blockchain of Ethereum, and not on their own. But they are the special ones, and here is why!</p>\n<p>A stablecoin is a type of crypto token whose price is “pegged” (or tied) to the value of the dollar, and which is backed by actual dollars, as well. In other words, <strong>one stablecoin will always be worth one dollar</strong>. It’s like a virtual US dollar in a blockchain with always the same value of the tangible US dollar in real life.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-5.o.jpg/" alt=\"Coin vs token: Ethereum-based tokens.\" width=\"800\" height=\"747\" /></p>\n<p>To get a broader picture, the most popular stablecoin today is <strong><a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-tether-usdt/">USDT <strong>(Tether)</strong></a>. Tether is HUGE. As of writing this section, it’s the third-largest crypto asset, right after Bitcoin and Ethereum, and it possesses a <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-market-capitalization-market-cap-mcap/">market capitalization</a> of over $78 billion</strong>. In addition, as I mentioned before, one Tether will always be worth one US dollar in value and will never change. </p>\n<p><em>If Tether is so incredibly huge, then why doesn’t it have a blockchain of its own?</em></p>\n<p>Once again, this is because of just how good Ethereum is when it comes to launching such crypto assets as stablecoins or any other types of tokens. The team behind Ethereum is constantly improving the technology, and making it easier, universal, and faster for developers to create and deploy tokens on the ETH blockchain.</p>\n<p>Developers of new tokens don’t really need to think about building their own blockchain environment from scratch, they get fully universal functionality of Ethereum, all pre-ready in the box.</p>\n<h2>What are the Differences Between Coins and Tokens?</h2>\n<p>Continuing on with this chapter, we’ve established what crypto coins and tokens are. Now, what are the actual differences between these two?</p>\n<p>Well, the biggest difference is just that - while crypto coins have blockchains of their own, tokens use the blockchains of existing coins. Though it’s worth mentioning that <strong>NOT ALL blockchains</strong> allow for tokens to be created on them!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-6.o.jpg/" alt=\"Coin vs token: Differences between coins and tokens.\" width=\"800\" height=\"239\" /></p>\n<p>Think about it this way - imagine that each crypto coin is some sort of a building. There are bigger buildings, smaller buildings, and so on. All of them serve different functions and have different features, right?</p>\n<p>For example, some buildings have large garages where you can store a lot of cars. Then there are small buildings (for example, private houses) that might not have a designated place for a car, in general!</p>\n<p>Well, in this case, let’s imagine that <strong>crypto tokens would actually be the cars</strong> that can be stored (or not) next to the buildings in the virtual city we just mentioned.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-7.o.jpg/" alt=\"Coin vs token: An example with a car.\" width=\"801\" height=\"433\" /></p>\n<p>In the same manner, some crypto coin blockchains allow developers to create tokens on them, while others do not. </p>\n<p><em>Why? </em>Because coin developers simply designed their blockchains that way, just to serve different purposes. Some coins were built with the intention just to <strong>serve their own mission</strong>. For example, Bitcoin was designed to just be the money equivalent in the virtual world and that’s it.</p>\n<p>On the opposite side, other coins were designed to serve not just their own, but additional features, by sharing their own functionality with tokens that could be launched and function in accordance with the parent coin on which those blockchain tokens were launched.</p>\n<p>The most popular blockchains for token creation are <strong>Ethereum</strong>, the <strong>Binance Smart Chain</strong>, and <strong>TRON</strong>.</p>\n<p>Another big difference between coins and tokens is that coins usually serve a larger purpose, and are more general in their use, while token utility concentrates on specific projects.</p>\n<p><em>Sounds confusing? </em>Allow me to give you a few examples.</p>\n<p>Let’s take <strong>Bitcoin</strong> and the <strong>Uniswap token</strong>. Bitcoin is the largest cryptocurrency on the market. Most people agree that its use case is that of a “store of value”. Meaning that people invest in Bitcoin with the hope that their investments will grow in value, or at least that their money will retain its value.</p>\n<p><em>A very general and broad use case, wouldn’t you agree?</em></p>\n<p><em><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-8.o.jpg/" alt=\"Coin vs token: Store of value.\" width=\"800\" height=\"446\" /></em></p>\n<p>Now, the Uniswap token is a token of the most popular decentralized crypto exchange, <strong>Uniswap</strong>. The exchange allows you to trade one type of Ethereum token for another, in an anonymous manner, and without any official company overseeing the process (thus, it’s decentralized). The Uniswap token, however, isn’t required for those trades.</p>\n<p><em>So… What is it even used for, then?</em></p>\n<p>Well, Uniswap token holders will be able to <strong>vote for changes and upgrades</strong> made to the exchange in question and might receive some discounts when swapping other tokens on the platform. Here, the use case of the Uniswap token is very niche and related strictly to the decentralized exchange platform.</p>\n<p>Another great example would be the earlier-mentioned <strong>Ethereum coin</strong>, and its well-known token called <strong>Shiba Inu</strong>. Ethereum blockchain allows developers to create crypto projects in a fast and efficient manner, by using special Ethereum features such as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a>.</p>\n<p>Smart contracts are basically automated agreements between two or more parties. I won’t go too in-depth into the topic, but if you’re interested to learn more about it, you can check out the section \"<a href=https://www.bitdegree.org/"/crypto/learn/what-are-smart-contracts/">What are Smart Contracts?</strong></a>\". For now, it should suffice to say that smart contracts are an essential part of the Ethereum network.</p>\n<p><img title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto-coins-vs-tokens-9.o.jpg/" alt=\"Coin vs token: Shiba Inu token.\" width=\"800\" height=\"438\" />Essentially, Ethereum is used as a launchpad for other projects - it’s like a computer that you run programs on. The Shiba Inu token, on the other hand, would be one of these programs - a token of the Ethereum.</p>\n<p>It was created on the Ethereum blockchain and this means that Shiba Inu has all of the <strong>fundamental characteristics of the Ethereum blockchain </strong>and it works in accordance with the logic of this network. However, you might wonder - <em>what’s the purpose of this token?</em></p>\n<p>Well, Shiba Inu was created as something that’s known as a “meme token”. Essentially, it has no single, clear purpose, and is mostly used for investment and meme purposes. Nowadays, you may also use Shiba Inu to donate to certain animal charities. In addition, there’s artwork being created that’s inspired by the project, but once again, its uses are very niche.</p>\n<h2>Why Do the Differences Between Coins and Tokens Matter?</h2>\n<p>Moving on, we’ve now covered what are crypto coins and tokens, and how they’re different from one another. The last thing that we need to discuss in this section is the question of why these things should even matter to you, in the first place!</p>\n<p>As you might have gathered already, coins and tokens are very different in how they work. Thus, anyone who is interested in crypto <strong>should be able to differentiate</strong> between the two. It’s one of the biggest questions in crypto.</p>\n<p>However, to tell you my honest opinion, apart from being savvy about the topic and understanding how crypto works, you aren’t really going to need to know the specific differences between coins and tokens, especially if you’re simply investing in or trading crypto.</p>\n<p>Sure, depending on if it's a coin or a token, the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transaction-fee/">transaction fees</strong></a> are going to be different, and the logic behind the project will possess different features and quirks, too. But, to your average investor, this usually does not matter. Instead, people look into the ACTUAL PROJECTS, and their value proposition - not if it’s a coin or a token.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/coin-vs-token","youtube_video":{"id":8,"channel_id":1,"sort":58,"video_title":"Crypto Token VS Coin (Animated Explainer & Examples)","description":"What’s the difference between crypto Tokens VS Coins?\n\nBoth coins and tokens are cryptocurrency assets. However, coins have blockchains of their own, while tokens are built on existing blockchains, and usually represent some sort of a project.\n\nToday I’ll explain to you what crypto coins and tokens are, without using any complicated crypto terminology or industry-specific jargon. With the help of examples and visual stories, I will also discuss the specific differences between the two assets, and explain why you should care about all of it, in the first place.\n\nDo you think the differences between coins and tokens are important? Share your opinions in the comments down below!\n\nVideo Time Table:\n\n0:00 Introduction to Coin VS Token\n1:12 What Are Crypto Coins & Tokens?\n6:52 What Are the Differences Between Coins & Tokens?\n11:13 Why Do The Differences Between Coins & Tokens Matter?\n12:16 Wrap-up: Coin VS Token\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#CoinVsToken #TokenVsCoin #CryptoTokenVsCoin #CryptoCoin #CryptoToken #Blockchain #Cryptocurrencies","video_id":"kNAC7CXFOTw","duration":760,"view_count":13380,"thumbnail_url":"https://i.ytimg.com/vi/kNAC7CXFOTw/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-01-27 16:19:15","created_at":"2022-02-21T13:20:28.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}},"featured_image":{"id":6414,"uuid":"c272a929-e278-42e8-9f7c-5425cfa42224","public_url":"https://assets.bitdegree.org/crypto/storage/media/coin-vs-token.o.jpg","path":"crypto/storage/media/coin-vs-token.o.jpg","original_path":"crypto/storage/media/coin-vs-token.jpg","name":"coin-vs-token.o.jpg","original_name":"coin-vs-token.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"97.03KB"}},"chapterList":[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-blockchain.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/blockchain-101.jpg","rating":100,"sections":[{"slug":"what-is-blockchain","title":"What is the Blockchain?","featured_image_id":6412,"status":"published","chapter_id":1,"language":"en","order":1,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-blockchain","featured_image":{"id":6412,"uuid":"152ba579-ce8d-488a-9e06-bcd99e976b7d","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","original_path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.jpg","name":"what-is-blockchain-626fbe085a0cd.o.jpg","original_name":"what-is-blockchain.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"93.86KB"},"youtube_video":null},{"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","featured_image_id":7205,"status":"published","chapter_id":1,"language":"en","order":2,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/decentralized-blockchain","featured_image":{"id":7205,"uuid":"c5d6f6a7-4914-4d6b-9fdd-e94dfb0bae82","public_url":"https://assets.bitdegree.org/crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","path":"crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","original_path":"crypto/storage/media/decentralized-blockchain-featured-image.jpg","name":"decentralized-blockchain-featured-image.o.jpg","original_name":"decentralized-blockchain-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"136.00KB"},"youtube_video":null},{"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","featured_image_id":7397,"status":"published","chapter_id":1,"language":"en","order":3,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/blockchain-transaction","featured_image":{"id":7397,"uuid":"e60dff45-4c5d-4b44-a2c1-a27e49f700e7","public_url":"https://assets.bitdegree.org/crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","path":"crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","original_path":"crypto/storage/media/blockchain-transaction-featured-mage.jpg","name":"blockchain-transaction-featured-mage.o.jpg","original_name":"blockchain-transaction-featured-mage.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"85.83KB"},"youtube_video":null},{"slug":"crypto-fees","title":"The Different Types of Crypto Fees 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Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"currentChapter":"cryptocurrencies","currentSection":"coin-vs-token","readingTime":10,"readingLevel":"easy"},"url":"/crypto/learn/coin-vs-token","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">
All Crypto From

Scratch!

Crypto 101 Handbook

Chapter 1: Blockchain

1.1

What is the Blockchain?
1.2

Anonymous & Decentralized Blockchains: The Cornerstone of Crypto
1.3

What is a Blockchain Transaction in Crypto?
1.4

The Different Types of Crypto Fees Explained
1.5

The Key Notion Behind the Concept of Bridging in Crypto
1.6

Different Types of Blockchains: What to Look Out For?
Chapter 2: Cryptocurrencies

2.1

What is a Cryptocurrency?
2.2

How Does Cryptocurrency Work?
2.3

Is Cryptocurrency a Good Investment? The Pros & Cons
2.4

Coin VS Token: How Do They Differ?
2.5

What are Stablecoins, Altcoins & Wrapped Coins?
2.6

Bitcoin: the Pioneer of the Crypto World
2.7

The Ultimate Blockchain for dApp Creation: Ethereum
2.8

What is Cardano and What is It Used For?
2.9

Shiba Inu: the Dogecoin Killer
2.10

Is Solana an Improved Version of Ethereum?
2.11

The Bridge Between Blockchains: Polkadot
2.12

Polygon: the Essential Scaling Solution for Ethereum
2.13

The Practical Use of Crypto
Chapter 3: Crypto Exchanges

3.1

How do Cryptocurrency Exchanges Work?
3.2

DEX VS CEX: Two Sides of the Crypto Exchange Industry
3.3

Crypto Day Trading: The Difference Between Buying, Trading, and Swapping
3.4

KYC & AML: The Key to Complying With Legal Industry Standards
3.5

From Fiat to Crypto: How to Buy Crypto for the First Time
3.6

Taking Profits: Turning Crypto Into Fiat
3.7

You’ve Got Crypto: What Can You Do With It?
Chapter 4: Crypto Wallets

4.1

What is a Crypto Wallet?
4.2

Hot Wallet VS Cold Wallet: Which One to Pick?
4.3

What are Non-Custodial Crypto Wallets?
4.4

Metamask: The Leading Non-Custodial Wallet
4.5

The Key Crypto Wallet Safety Practices: How Safe Can Crypto Be?
Chapter 5: NFTs

5.1

What are Non-Fungible Tokens (NFTs)?
5.2

NFT Trading: The Ins and Outs
5.3

Tips and Tricks of Choosing the Right NFTs
5.4

How to Store NFTs: Best Practices
5.5

How to Create Your Own NFTs?
5.6

Making Passive Money with NFTs
Chapter 6: dApps & Defi

6.1

What is Decentralized Finance (DeFi)?
6.2

DeFi 2.0: The New Version of Decentralized Finance
6.3

What Are dApps and How Do They Work?
6.4

Picking the Right dApps: Dos and Don'ts
6.5

Web 3.0: The Future of the Internet
6.6

What is the Core Purpose of Smart Contracts?
6.7

The Notion of a Decentralized Autonomous Ogranization (DAO)
6.8

What is the Goal of Staking Crypto Assets?
6.9

What is a Liquidity Pool and How Does It Work?
6.10

Automated Market Maker: the Cornerstone of the Decentralized Crypto Exchange Industry
6.11

The Main Yield Farming Techniques
6.12

Crypto Oracles: The Link Between Blockchain and Outside World Data
6.13

The Peculiarities of Decentralized Crypto Gambling
6.14

Metaverse: A New Perception of Reality
Chapter 7: Trading & Investing

7.1

Where Can You Trade Cryptocurrencies?
7.2

Investing in Crypto: What Investing Options Do You Have?
7.3

ICO vs IDO vs IEO: Which One is the One?
7.4

What are Crypto Airdrops and How to Get Them?
7.5

How to Get Free Crypto Assets?
7.6

What is Crypto Arbitrage: The Main Principles
7.7

What is FUD: How to Use It to Your Advantage While Investing in Crypto?
7.8

Investing in Cryptocurrency: How to Manage Your Risks?
7.9

What is a Rug Pull in Crypto?
7.10

How to Spot and Avoid Rug Pulls?
7.11

The Key Legal Techniques of Avoiding Crypto Taxes
Chapter 8: Crypto Analysis

8.1

Bearish and Bullish Markets: Do They Matter?
8.2

5 Best Crypto Technical Analysis Indicators You Must Know About
8.3

Technical Analysis: What are Candlesticks, Trendlines, and Patterns?
8.4

Crypto Tracking: How to Track Your Favorite Coins & Tokens?
8.5

Crypto Research Fundamentals & Social Signals: Your Daily Trading Strategy
Chapter 9: Mining

coming soon

Chapter 10: Crypto Terms

10.1

All Crypto Terms

Handbook Cover Page

Chapter 2: Cryptocurrencies

Coin VS Token: How Do They Differ?

Did you know that, as of 2022, there are nearly over 10,000 digital coins out there?

Easy

10 minutes

Watch Video

In this section, I’ll explain the differences between crypto coins VS tokens.

Imagine that you’ve decided to start working out. While planning out your routine, you’ve come to a crossroads - should you purchase your own equipment, or sign up for a gym membership?

Both positions have their own pros and cons. If you were to buy your own training equipment, this would allow you to be independent, and train whenever you’d like. On the other hand, it would cost a lot of money and would require you to build a mini gym for yourself all on your own. These are the issues that would be avoided by buying a gym membership.

So, this example illustrates the relationship between crypto coins and tokens perfectly with their cons and pros equally.

In this section, we’re comparing crypto coins VS tokens. To be more specific, we’ll talk about what these two assets are, what are their main differences, and why this is something that you should know about, in the first place.

Ready? Let’s get right to it!

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Video Explainer: Coin VS Token: How Do They Differ?

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What are Crypto Coins and Tokens?

To start things off, before we can really get into the comparison between crypto coins and tokens, we do need to figure out what these two assets are, in the first place.

Some of the most popular examples of crypto coins include Bitcoin, Ethereum, and Binance Coin. In other words, they are popular and very large crypto assets that have some sort of a broad function associated with them.

Tokens, on the other hand, are smaller crypto assets that usually serve a much more niche and specific purpose than coins. On top of that, tokens can’t exist on their own - instead, they are “hosted” on the blockchain of a crypto coin. So, you could say that tokens as so-called child coins that are based on the big environments of parent coins.

Here, it’s also worth mentioning that the term “cryptocurrency” can refer to both coins and tokens - it’s situation-dependent! So, to make it clear here is an example for you:

Imagine if coins are visualized as operating systems on your computer (Microsoft, Windows, or Apple's macOS), then crypto tokens are the programs that you launch in those Windows or macOS environments. Still, Microsoft Windows as a parent software can run without any additional programs, but with extra child apps, let's say Chrome internet browser, Microsoft Office package, and Cyberpunk game, it is more versatile and fun. Simple enough, isn’t it?

Now, a blockchain is a place where data, or information, is stored. I won’t go into detail on the topic in this section, but if you’re really interested to learn more about it, you can check out the section "What is the Blockchain?".

That being said, let’s reiterate the earlier point - crypto coins have their own blockchains, while crypto tokens are hosted on already-existing blockchains of the coins. In other words, tokens DO NOT have a blockchain of their own but they are children of bigger parents - coins, and they use their parents’ blockchain to launch and operate themself!

Another way you can look at it is via the example I’ve given at the beginning of this section. If you want to start working out and want to build a miniature gym of your own (with your own equipment, that is), you will be investing money, time, and a lot of patience. This is the same as when developing a new cryptocurrency - the developers must code the entire logic and functionality model of the brand new blockchain behind their future coin.

Sticking with this example, taking out a local gym membership will save you both money and a lot of time, as well. Thus, creating a token on an existing blockchain environment is much easier - no matter what sort of a function it will serve, the core, underlying logic behind it will still be that of the blockchain that it’s built on.

When discussing crypto coins and tokens, your best bet would be to think about Ethereum. It’s the second-largest crypto project in the world, right after Bitcoin, and is often referred to as the “global computer”.

The vast majority of all tokens on the current market are developed, created, and launched on the Ethereum blockchain. Without getting too technical, the main reason why this is the case is that Ethereum provides probably the best and easiest environment for token launch and it was the first highly adopted coin with such a smart blockchain environment that supports this functionality.

Returning back, a great example of the more well-known Ethereum-based tokens would be, the so-called, stablecoins. And yes, it sounds weird, but this is the one and only situation when tokens are called coins, even if they are still created on a parent blockchain of Ethereum, and not on their own. But they are the special ones, and here is why!

A stablecoin is a type of crypto token whose price is “pegged” (or tied) to the value of the dollar, and which is backed by actual dollars, as well. In other words, one stablecoin will always be worth one dollar. It’s like a virtual US dollar in a blockchain with always the same value of the tangible US dollar in real life.

To get a broader picture, the most popular stablecoin today is USDT (Tether). Tether is HUGE. As of writing this section, it’s the third-largest crypto asset, right after Bitcoin and Ethereum, and it possesses a market capitalization of over $78 billion. In addition, as I mentioned before, one Tether will always be worth one US dollar in value and will never change.

If Tether is so incredibly huge, then why doesn’t it have a blockchain of its own?

Once again, this is because of just how good Ethereum is when it comes to launching such crypto assets as stablecoins or any other types of tokens. The team behind Ethereum is constantly improving the technology, and making it easier, universal, and faster for developers to create and deploy tokens on the ETH blockchain.

Developers of new tokens don’t really need to think about building their own blockchain environment from scratch, they get fully universal functionality of Ethereum, all pre-ready in the box.

What are the Differences Between Coins and Tokens?

Continuing on with this chapter, we’ve established what crypto coins and tokens are. Now, what are the actual differences between these two?

Well, the biggest difference is just that - while crypto coins have blockchains of their own, tokens use the blockchains of existing coins. Though it’s worth mentioning that NOT ALL blockchains allow for tokens to be created on them!

Think about it this way - imagine that each crypto coin is some sort of a building. There are bigger buildings, smaller buildings, and so on. All of them serve different functions and have different features, right?

For example, some buildings have large garages where you can store a lot of cars. Then there are small buildings (for example, private houses) that might not have a designated place for a car, in general!

Well, in this case, let’s imagine that crypto tokens would actually be the cars that can be stored (or not) next to the buildings in the virtual city we just mentioned.

In the same manner, some crypto coin blockchains allow developers to create tokens on them, while others do not.

Why? Because coin developers simply designed their blockchains that way, just to serve different purposes. Some coins were built with the intention just to serve their own mission. For example, Bitcoin was designed to just be the money equivalent in the virtual world and that’s it.

On the opposite side, other coins were designed to serve not just their own, but additional features, by sharing their own functionality with tokens that could be launched and function in accordance with the parent coin on which those blockchain tokens were launched.

The most popular blockchains for token creation are Ethereum, the Binance Smart Chain, and TRON.

Another big difference between coins and tokens is that coins usually serve a larger purpose, and are more general in their use, while token utility concentrates on specific projects.

Sounds confusing? Allow me to give you a few examples.

Let’s take Bitcoin and the Uniswap token. Bitcoin is the largest cryptocurrency on the market. Most people agree that its use case is that of a “store of value”. Meaning that people invest in Bitcoin with the hope that their investments will grow in value, or at least that their money will retain its value.

A very general and broad use case, wouldn’t you agree?

Now, the Uniswap token is a token of the most popular decentralized crypto exchange, Uniswap. The exchange allows you to trade one type of Ethereum token for another, in an anonymous manner, and without any official company overseeing the process (thus, it’s decentralized). The Uniswap token, however, isn’t required for those trades.

So… What is it even used for, then?

Well, Uniswap token holders will be able to vote for changes and upgrades made to the exchange in question and might receive some discounts when swapping other tokens on the platform. Here, the use case of the Uniswap token is very niche and related strictly to the decentralized exchange platform.

Another great example would be the earlier-mentioned Ethereum coin, and its well-known token called Shiba Inu. Ethereum blockchain allows developers to create crypto projects in a fast and efficient manner, by using special Ethereum features such as smart contracts.

Smart contracts are basically automated agreements between two or more parties. I won’t go too in-depth into the topic, but if you’re interested to learn more about it, you can check out the section "What are Smart Contracts?". For now, it should suffice to say that smart contracts are an essential part of the Ethereum network.

Essentially, Ethereum is used as a launchpad for other projects - it’s like a computer that you run programs on. The Shiba Inu token, on the other hand, would be one of these programs - a token of the Ethereum.

It was created on the Ethereum blockchain and this means that Shiba Inu has all of the fundamental characteristics of the Ethereum blockchain and it works in accordance with the logic of this network. However, you might wonder - what’s the purpose of this token?

Well, Shiba Inu was created as something that’s known as a “meme token”. Essentially, it has no single, clear purpose, and is mostly used for investment and meme purposes. Nowadays, you may also use Shiba Inu to donate to certain animal charities. In addition, there’s artwork being created that’s inspired by the project, but once again, its uses are very niche.

Why Do the Differences Between Coins and Tokens Matter?

Moving on, we’ve now covered what are crypto coins and tokens, and how they’re different from one another. The last thing that we need to discuss in this section is the question of why these things should even matter to you, in the first place!

As you might have gathered already, coins and tokens are very different in how they work. Thus, anyone who is interested in crypto should be able to differentiate between the two. It’s one of the biggest questions in crypto.

However, to tell you my honest opinion, apart from being savvy about the topic and understanding how crypto works, you aren’t really going to need to know the specific differences between coins and tokens, especially if you’re simply investing in or trading crypto.

Sure, depending on if it's a coin or a token, the transaction fees are going to be different, and the logic behind the project will possess different features and quirks, too. But, to your average investor, this usually does not matter. Instead, people look into the ACTUAL PROJECTS, and their value proposition - not if it’s a coin or a token.

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All Crypto From

Scratch!

Crypto 101 Handbook

Coin VS Token: How Do They Differ?

Video Explainer: Coin VS Token: How Do They Differ?

What are Crypto Coins and Tokens?

What are the Differences Between Coins and Tokens?

Why Do the Differences Between Coins and Tokens Matter?

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