A token represents a digital asset that operates within a different cryptocurrency’s blockchain network. Unlike cryptocurrencies (coins), which are limited to their native blockchains, tokens utilize technology from various other cryptocurrency blockchains.
Differences Between Coins and Tokens:
Cryptocurrency coins are primarily designed for financial transactions, such as buying and selling goods and services, and facilitating monetary transfers.
Tokens have a broader range of applications beyond monetary transactions. They can serve as assets and securities, including art, stocks, ownership rights, and more, all of which can be transferred between individuals.
Tokens, depending on their intended use, leverage blockchain mechanisms like smart contracts and proof of work to record transactions.
Interestingly, it’s important to note that all coins can be categorized as tokens because both can function as digital currencies for financial transactions. However, not all tokens are used as coins for monetary exchanges; some are held as assets or serve other non-monetary purposes.
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