Cryptocurrencies spring to mind when you think about decentralized digital assets. For those new to blockchain and cryptocurrency, knowing the distinction between digital assets, cryptocurrencies, and tokens is critical.
While these phrases are sometimes used similarly, they are different in several significant ways. A non-tangible item that is generated, traded, and kept in a digital form is referred to as a digital asset. Cryptocurrency and crypto tokens are examples of digital assets from the perspective of blockchain.
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Cryptocurrency and tokens are special kinds of digital assets that use cryptography, a sophisticated encryption method that ensures the legitimacy of crypto assets by preventing forgery and double-spending.
In this case, double-spending is the act of making double payments with the same currency or funds intended to mislead the receiver of those monies usually carried out by fraudsters.
The difference between the two decentralized digital assets
While a cryptocurrency is a blockchain network’s native asset that may be sold, used as a means of exchange, and stored of worth.
It is commonly known as a blockchain’s native money because it is obtained directly by the blockchain technology on which it operates.
Also, these particular decentralized digital assets are frequently used not simply to pay network transaction fees, but also to motivate users to maintain the cryptocurrency’s network safety.
Also read, 3 Quick Questions about Digital Assets
Tokens, on the other hand, are digital currency units created by blockchain-based businesses or initiatives on top of already existing blockchain networks.
While they frequently share extensive compatibility with the network’s cryptocurrencies, they are a whole new digital asset class.
It’s worth noting that cryptocurrencies are a blockchain protocol’s inherent asset, while tokens are generated by platforms that create on top of those blockchains.
The main difference between the two types of digital assets is that cryptocurrencies, such as BTC or ETH, are built as components of a platform that is generated on an existing blockchain, whilst tokens, such as the many ERC-20 tokens that constitute the Ethereum ecosystem, are built as part of a platform that is formed on a blockchain that is already existing.
Also read, Digital Assets: Bitcoin vs Gold
Tokens are items that reflect a right or claim in simple terms. They’re frequently employed to protect digital assets.
Examples of Crypto digital assets
Ethereum (ETH), Litecoin (LTC), Cardano (ADA), Polkadot (DOT), Bitcoin Cash (BCH), Stellar (XLM), Dogecoin (DOGE), Binance Coin (BNB), and many more.
Examples of tokens
Access tokens, Platform tokens, Security tokens, Transactional tokens, Utility tokens, Governance tokens, and so on.
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