Cryptocurrencies have taken quite a huge leap in 2017 gaining millions of trustworthy investors and traders. A few years back, the concept of unusable and intangible currency like Bitcoin was a joke but it quickly became reality. Currently, many individuals and organizations are accepting Bitcoin and other cryptocurrencies as payment methods. If you don’t want to be left behind, it’s a wise move to know about crypto terminologies like Bitcoins, Blockchain, ICOs, Altcoins and Tokens.
If you have ever visited the crypto groups in social media or forums, you might often come across the terms Altcoins and Tokens. We know that change is never easy. Many people might find the cryptocurrency terms above their head. So, in this article, we hope to clear your mind about the differences between Altcoins and Tokens. Let’s jump into the crypto world without any further ado.
So, What are Altcoins and Tokens in Cryptocurrency?
You might have already realized that Bitcoin is not the only cryptocurrency in the world. Hundreds of cryptocurrencies have popped up recently. It’s all due to the growing popularity of cryptocurrencies and their promising future. If you check the Crypto Market, you’ll see a lot of coins like Bitcoin, Ethereum, Ripple, Litecoin etc…
Although many people term all digital currencies as cryptocurrencies, there are subtle differences between them. The most common categorizations being Altcoins and Tokens.
Altcoins (Alternative Cryptocurrency Coins)
The inception of cryptocurrency began with Bitcoin but it has flourished with the advent of various other cryptocurrencies like Ethereum, Ripple, Litecoin etc… These other currencies are commonly termed as Alternative cryptocurrency Coins or Altcoins. Most of the Altcoins are a tweaked fork of the Bitcoin built on Bitcoin’s opensource protocols but with modifications to the feature set. So, each Altcoin has an entirely different feature set although they use the original protocols of Bitcoin. Some of the examples of Bitcoin-based Altcoins are Litecoin, Dogecoin, Namecoin.
However, there are other Altcoins which are running entirely different protocols than Bitcoin. Many popular Altcoins like Ethereum, Ripple have created their own blockchain and protocols that run their cryptocurrency. Although they’re completely independent of Bitcoin’s protocols, these currencies are often termed as Altcoins for the sake of simplicity.
All the Altcoins have their own blockchains where the transactions take place and have their independent wallets where they can store the coins.
Unlike Altcoins, Tokens represent a specific resource, asset or utility that usually resides on top of another blockchain. Most often, the Tokens are built on top of popular blockchains like Ethereum and Waves. Tokens can be any assets that can be tradeable, from products to loyalty points.
Creating Tokens is quite easier compared to Altcoins as you don’t have to create your own protocols or blockchain. You can simply pick a standard blockchain model like Ethereum that allows creating your own Tokens. This ability to develop your own Tokens is possible through the use of smart contracts, programmable computer codes that are independent of 3rd party operations.
Tokens are designed and distributed to the public through an Initial Coin Offering (ICO). It is a crowdfunding medium to launch a new coin or token to fund project development. You can collate ICOs as Initial Public Offerings (IPO) with some differences.
The major difference between Altcoins and Tokens is that Altcoins have their own blockchains while tokens operate on top of standard Blockchains like Ethereum that facilitates the development of decentralized applications.