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What is a coin?
Bitcoin (BTC), Monero (XMR), and Ethereum (ETH) are examples of "coins" in the cryptocurrency realm. They share the commonality of existing on their independent ledgers: BTC operates on the original Bitcoin blockchain, ETH is used within the Ethereum blockchain, and XMR exists on the Monero blockchain, and so forth. All of these can be sent, received, or mined.
As the name suggests, coins often share characteristics with traditional currencies: they are fungible, divisible, portable, and have a limited supply. Typically, the use of cryptocurrency coins is akin to physical cash, used for transactions (though adoption in retail is slow). However, there are exceptions, as Ethereum's Ether (ETH) possesses all coin attributes but extends beyond its "money" function to facilitate transactions within the Ethereum blockchain.
There are also so-called "altcoins" because they are considered alternatives to the original cryptocurrency Bitcoin. Many altcoins are forks of Bitcoin and are developed using Bitcoin's open-source protocol, such as Litecoin (LTC) and Dogecoin (DOGE). However, ETH and XMR, which are built on entirely new blockchains, are also referred to as altcoins. Therefore, the definition of altcoins should consider whether it is a cryptocurrency with its blockchain that is not Bitcoin's original blockchain. If so, it is considered an altcoin.
What is a token?
A token is a digital asset used within the ecosystem of a specific project. The main difference between tokens and coins is that tokens require another blockchain platform to operate. Ethereum is the most common platform for creating tokens, primarily due to its smart contract capabilities. Tokens created on the Ethereum blockchain are often referred to as ERC-20 tokens, such as the widely used USDT. There are other platforms for tokens, such as NEO or Waves.
Unlike coins, tokens have different purposes, although they can also serve as a means of payment (currency tokens). Many tokens are created to be used in decentralized applications (DApps) and their networks. "Utility tokens" grant holders access to project functionalities, similar to using basic attention tokens (BAT) for enhanced digital advertising. Additionally, there are "security tokens" representing an investment in a project but do not confer actual ownership of the startup company to the holder.
Digital currency and virtual currency
The term "digital currency" is a broad term used to describe all forms of electronic currency, whether virtual or cryptocurrencies. The concept of digital currency was first proposed by David Chaum in a research paper in 1983 and later implemented in the form of Digicash.
Digital currencies are characterized by their existence solely in digital or electronic form. They are intangible, unlike physical US dollar bills or coins, and can only be owned and spent online through an electronic wallet or a designated connected network. Transactions are typically instant and nearly fee-free, often without intermediaries.
Therefore, coins, tokens, and virtual currencies are all forms of digital currencies. While virtual currencies are defined as digital, they are still categorized separately. As the European Central Bank defined the term in 2012, virtual currency is "a type of unregulated, digital money, which is issued and usually controlled by its developers and is used and accepted among the members of a specific virtual community." Examples include tokens in games like World of Warcraft, cash cards in GTA Online, or FIFA points in EA Sports games. These exist within the ecosystems of their respective games and are used to unlock rewards such as new items and animations. Virtual currencies are typically not issued or regulated by central banks or other financial authorities. Cryptocurrencies and virtual currencies are distinct and should not be confused, although both fall under the broader category of "digital currencies." |
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Post time 10-1-2024 11:13:23
Post time 15-1-2024 13:28:23