The most widely used token standards are ERC-20, which allows the creation of tokens that can interoperate within Ethereum’s ecosystem of decentralized apps, and ERC-721, which was designed to enable non-fungible tokens that are individually unique and cannot be interchanged with other similar tokens. There are several widely used token standards for creating crypto tokens, the majority of which have been built on top of Ethereum. These tokens can serve a multitude of functions on the platforms for which they are built, including participating in decentralized finance (DeFi) mechanisms, accessing platform-specific services, and even playing games. Crypto tokens built using Ethereum include DAI, LINK, COMP, and CryptoKitties, among others. While ether is the cryptocurrency native to the Ethereum blockchain, there are many other different tokens that also utilize the Ethereum blockchain. For instance, the Ethereum blockchain’s native token is ether (ETH). While they often share deep compatibility with the cryptocurrencies of that network, they are a wholly different digital asset class.Ĭryptocurrencies are the native asset of a specific blockchain protocol, whereas tokens are created by platforms that build on top of those blockchains. Tokens - which can also be referred to as crypto tokens - are units of value that blockchain-based organizations or projects develop on top of existing blockchain networks. Uses cryptography to secure the cryptocurrency’s underlying structure and network system. Instead, cryptocurrencies rely on code to manage issuance and transactions.īuilt on a blockchain or other Distributed Ledger Technology (DLT), which allows participants to enforce the rules of the system in an automated, trustless fashion. A store of value is an asset that can be held or exchanged for a fiat currency at a later date without incurring significant losses in terms of purchasing power.Ĭryptocurrencies typically exhibit the following characteristics:ĭecentralized, or at least not reliant on a central issuing authority. A medium of exchange is an asset used to acquire goods or services. In many cases, cryptocurrencies are not only used to pay transaction fees on the network, but are also used to incentivize users to keep the cryptocurrency’s network secure.Ĭryptocurrencies typically serve as a medium of exchange or store of value. A cryptocurrency is issued directly by the blockchain protocol on which it runs, which is why it is often referred to as a blockchain’s native currency. The key differentiation between the two classes of digital asset is that cryptocurrencies are the native asset of a blockchain - like BTC or ETH - whereas tokens are created as part of a platform that is built on an existing blockchain, like the many ERC-20 tokens that make up the Ethereum ecosystem.Ī cryptocurrency is the native asset of a blockchain network that can be traded, utilized as a medium of exchange, and used as a store of value. In the context of blockchain, digital assets include cryptocurrency and crypto tokens.Ĭryptocurrency and tokens are unique subclasses of digital assets that utilize cryptography, an advanced encryption technique that assures the authenticity of crypto assets by eradicating the possibility of counterfeiting or double-spending. Broadly speaking, a digital asset is a non-tangible asset that is created, traded, and stored in a digital format. While these terms are often used interchangeably, they are different in a number of key ways. If you’re just starting out in blockchain and cryptocurrency, it’s essential to understand the difference between digital assets, cryptocurrencies, and tokens.
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