The widespread use of the term "crypto token" along with the term "crypto currency" is misleading. What is the difference between a crypto token and a crypto currency? Let's try to figure it out.
Firstly, what is a crypto currency? This is an internal account unit of any public blockchain, i.e. a blockchain, which uses mining (in the form of P-o-W or P-o-S). Mining is a necessary and important process in public blockchain and crypto currency acts as a stimulus for miners. In addition, crypto currency is used for transaction commissions and you can also sell it (exchange for fiat money). Thus, crypto currency performs the following functions:
· acts as a unit of account (unit of value) in the blockchain;
· participates in the value exchange (transactions);
· serves as an incentive for miners;
· is a value storage.
Crypto currency issuing is carried out during the course of mining. Therefore, issuing is the result of the operation by the crypto currency protocol and the issuer is the monetary system itself, its program code. Unlike crypto currency, issuing of tokens is carried out by a person (physical or legal) - the initiator of their release. Typically, a release of tokens occurs during the so-called ICO or TGE and their emission is limited. This is the first fundamental difference between a crypto token and a crypto currency.
The term token has several meanings; the two main ones are:
· Private currency unit.
· A device designed to provide information security to a user; it is usually a hardware key that is used to identify its owner.
Since token has become more widespread in the second sense of the word, this value is often attracted to a crypto currency token. This is facilitated by the analogy of crypto tokens with the API key concept. For example, the Amazon web services API key allows you to access the Amazon cloud. Just like the token, for example, Ethereum (ETH), allows you to access the decentralized has become more widespread calculation network.
Also tokens have one more common property with API-keys - these are private keys. If someone gets access to the private keys of your tokens, then they will be able to take them just like if they got access to your APIs for Amazon services, they will be able to bill your Amazon account. Therefore, many believe that crypto token is related to the notion of security.
But, since crypto currency tokens have some usefulness, they can act as a commodity and they can be traded. So, tokens have a price. And here we return to the first meaning of the word - a private currency unit.
The first tokens (private banknotes) were minted by British merchants in England and the British colonies in the 17th century. Later they were universally produced by merchants, entrepreneurs and banks due to a lack of state currency. If you start from this understanding of the token, then crypto currency can be considered a token as well to some extent but a token with special properties.
At its core, a token is a kind of debt obligation, receipt or contract with a promise to the owner to provide a certain product or service. For example, a transportation ticket is a token that gives the right to a trip. Thus, tokens grant a subject the right to receive certain predefined benefits. And this definition is more suitable for a crypto currency token because it is tied to a project that provides a product or a service.
What are the properties of a crypto currency token? Here are the main ones:
· performs the function of payment means or a stock (security) in a particular project;
· basis of the token is an underlying crypto currency. Token is not just a data format; it must exist on a crypto currency platform, which ensures its security and reliability;
· a token exists only in a particular system. This system maintains a database and determines a token is allowed to do. Typically, functions of a token are spelled out in smart contracts.
· value of a token lies in the reputation of a project;
· its issue is an organizational action (usually ICO and TGE).
Winter of 2018 is already called the era of altcoins, i.e. any crypto currency other than Bitcoin. While Ethereum and Ripple reach the new heights in terms of rate change, a lot of projects are just planning to conduct an ICO and release their tokens, the largest of which is the crypto currency Gram on the basis of the Telegram messenger. To help you prepare for the future, we have compiled a step-by-step instruction for buying and storing any crypto currency.
The most popular listing of crypto currencies is called CoinMarketCap, which shows currencies, tokens and coins that have passed fork. This service shows the average exchange rate of each currency relative to the dollar. Choose your currency and remember its three-symbol designation: Bitcoin - BTC, ether - ETH and so on.
The main thing you will own is private keys from your tokens or coins. But, you will need a wallet to transfer them. Usually this is a special program or an online service. For example - myEtherWallet. It can only store Ethereum and any other tokens that are released on the Ethereum platform (you can check it on CoinMarketCap).
The public key here is called the "address" and your personal key is the "private key". To add another token to the wallet, first you need to find its name in the Ethplorer search engine and then find in myEtherWallet "Add your own tokens" in the menu. If a token was not released on the Ethereum platform but with some other development, the wallet will have to be searched for individually. For example, IOTA tokens should be stored in the official wallet of the project.
· The most accessible way - exchange office. BestChange service is a popular platform for exchanging different currencies. The number of variations is impressive. After selecting a currency pair, there will be the list of exchangers sorted by the lowest rate.
· The fastest way - bots. Several bots in the Telegram messenger allow you to perform exchange operations - the bottom line does not change but the interface may seem more customary. The bot will create a wallet automatically tying it to your phone number.
· The most profitable way - crypto exchange. The most profitable purchase-and-sale rates for crypto currency can be found on exchanges. In fact, these are an intermediary, which allow you to trade very quickly so that traders and brokers can earn on price jumps. The exchanges differ in the type of pairs that are available for trading, the commission's fees for internal transactions and for entering and withdrawing funds to the exchange.
To buy tokens or not to buy? There is no answer to this question but there is a recommendation for investing in ICO, which is true for all high-risk investments – put in only the amount that you are ready to lose.
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