Differences Between Digital Assets, Tokens & Coins
Cryptocurrency is becoming more popular, and people are just beginning to master the opportunities that have become available through these new technologies. However, understanding the subject is not always easy, since the concepts underlying the underlying technology can be very specialized and are most often associated with programming languages.
Our site is designed to help you navigate in such a complicated world of cryptocurrency, and in this material, we will explain some of the most fundamental concepts used in crypto space – assets, tokens, and coins.
What is an Asset?
Of these three concepts, only an asset has such a broad definition. The term “assets” is used not only when it comes to digital currencies, but also in the financial and banking sectors. This is due to the fact that the asset usually refers to a physical resource with an economic or financial value that is expected to provide a benefit to the owner (s) in the future. Assets can be either owned or controlled to obtain value and can be either tangible or intangible.
Traditional examples of assets include such things as money, real estate, gold. However, recently digital currencies, such as bitcoin, have also been classified as assets.
What is the Crypto Coin?
The Crypto coin is the official digital currency used by the cryptocurrency platform. For example, the Etherium platform has its own coins – ethers, and for the Ripple infrastructure – it’s XRP. Each separate coin is completely independent and has its own repository.
These digital “coins” are encrypted using cryptographic algorithms and do not have a centralized accounting. They work without a regulator or an intermediary since each transaction is checked by a network of nodes (computers managed by the miners ). All information about these data is contained in the distributed registry – the blockbuster. Coin, by and large, has the properties of virtual money and can be used as a means of exchange, to save savings or, perhaps, as a unit of account.
Since the coin performs the full functions of electronic money, he has his own purse called the wallet. The main advantage can be considered that they can be bought, displayed, or translated, like ordinary money.
What is a Token?
A token is a rare digital asset that exists on top of a coin or blockage. Access to it can be obtained only through a special offer with the use of an electronic signature. At the moment, the largest number of tokens exists in the network of Ethereum. To understand tokens, we must understand that the Etherium is not just a currency, but a network formed by a set of nodes, which in turn are related to each other. In particular, the Etherium can be used to create so-called smart contracts.
Smart contracts are basically a set of instructions that follow a very simple procedure called IFTTT – IF THIS, THEN THAT (if it is, then this). Smart contracts themselves “follow” the progress of the transaction, charge fines for violation or non-fulfillment of conditions, which excludes the variability of the treatment prescribed in it. The program contains all possible outcomes of the transaction, and it automatically monitors the fulfillment of obligations of both parties, which excludes any interference of third parties (intermediaries).
Similarly, tokens are created. They are a kind of essentially simplified and concretized version of a smart contract that represents something in exchange for ETH. Because they are smart contracts, they can be tracked in the blockbuster of the Etherium.
Tokens have become very useful in the cryptocurrency market because you do not need to modify the existing protocol or create a new block for them.
TYPES OF TOKENS
Can take the form of any physical trading asset. To date, the most interesting decentralized application that assumes this type of token is probably Digix. DGX tokens have a 100% gold security, which is made up of gold bars placed in the storage. The cost of each token is equivalent to 1 gram of gold. At the same time, any DGX owner can get physical gold in exchange for his tokens.
we could call them “coins for applications” since they can be used to purchase services and products inside DAPP (Distributive APPS). Since the total number of tokens is fixed, over time and if the demand for products or services offered by this DAPP increases, then the cost of the tokens, respectively, will increase.
Golem is an excellent example. What Golem offers is a decentralized economy of sharing computing power, where everyone can earn money on their computing power or developing and selling software. In principle, if you do not use all the computer power that the machine is capable of reproducing, you can supply excess power to the network and get Golem tokens in return. Unlike equity tokens, golems can be sold or used to purchase processing power.
Perhaps the most promising in the use of smart contracts Ethereum, they help new start-ups to self-finance themselves. The new DAPP can launch the initial offer of coins (ICO), so they have the opportunity to offer their own tokens to anyone who wishes to purchase them during the ICO. Acquired tokens mean ownership and control over DAPP, which makes you a shareholder. Just like in ordinary companies working in the stock market, you will be given the floor in the adoption of the DAPP course – the owners of the tokens will be able to vote through the blockchain, which makes the process transparent and safe.
All this makes tokens a new fascinating digital asset with huge potential, however, you must be very careful when investing in DAPPS. ICO is a terrific way for collaborative projects and getting value and decision making within an application, but sometimes the fact that tokens are limited and look exclusive makes them look like they have intrinsic value.
Do not get carried away with the hype at ICODo not get carried away with the hype of the limited ICO and allow FOMO (the missed opportunity syndrome) to control you. Before investing, you should carefully study the market model that DAPP offers and learn more about the information in the white paper to make sure there is a new idea that can be implemented in a more efficient way than in traditional markets.