Tokens
There are numerous types of cryptocurrencies that all serve a different utility. Crypto coins and crypto tokens are essentially the same things. They are virtual currencies that represent tradeable assets. Usually created by a blockchain-based platform as its particular form of virtual currency, it enables holders to invest in other virtual assets, or swap them out for real-world currency on crypto exchanges such as Binance.
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The Difference between Coins and Tokens
Technically, a “token” is a piece of data that’s used to verify and authenticate the identity or actions of any person using blockchain technology. While all coins are tokens, not all tokens are coins. There are really only two currencies considered to be crypto coins. Bitcoin and Ethereum. While the two are technically tokens as well, the sheer distance in popularity and value between these two and other tokens created the need to differentiate them from other tokens. Without buying or trading, coins can only be generated through mining, while tokens can generally be earned as prizes. “Token” originally referred to all cryptocurrencies. This word has since developed more practical use cases over time.
Types of Tokens
Today, the most common implementation of tokens is in decentralized exchanges; they verify users’ identity, some crypto-assets, and their transactions in order to run the majority of trading platforms online, securely.
DeFi tokens
A type of cryptocurrency-based protocol that has emerged in recent years. It mirrors traditional financial institutions such as lending and saving, insurance, or trading. Many of these protocols issue tokens that perform a variety of functions including the aforementioned, but can also be traded like any other cryptocurrency.
Governance tokens
Governance tokens are specialized decentralized finance (DeFi) tokens that give holders a say in the future of a protocol or autonomous organization (DAO). The popular play-to-earn game, Axie Infinity uses Axie Infinity Shards ($AXS) as their governance token. This token allows holders to influence how Axie Infinity is developed. The more $AXS you have, the more votes you get.
Non-fungible tokens (NFTs)
NFTs represent ownership of an item. They are utilized to make it easier for virtual assets to be verified as originating from the owner and not someone else.
Security tokens
Security tokens are a relatively new kind of asset whose blockchain-based nature allows them to offer their holders certain guarantees related to the origin of their value. Their primary function is to sell shares in a company or other enterprises such as real estate without the need for a broker.
Utility Tokens
A utility token is a type of currency that is unique to its blockchain ecosystem. Utility tokens power an application or protocol, and they can be bought and sold in exchange for some other currency like Ethereum or USDT. These units are usually (but not always) available in limited supply on the market at any given time. Take the ATLAS token for example. ATLAS can only be earned by playing Star Atlas. It is the primary medium of exchange within the Star Atlas metaverse. It can be used to pay for refueling, ship repairs, etc.