Ever caught yourself thinking that is not quite distinguish between the terms “cryptocurrency”, “token” or “digital currency” — and especially in one article? Many people would like to sort out and understand, finally, what is the word responsible for what. This article is designed to do it. Let’s deal.
Is there a difference between token, coin, digital currency and virtual currency?
In short: Yes, there is.
Between these concepts there are indeed differences: both small and significant. For example, when the Bank JPMorgan Chase JPM have created their own Coin, it was presented as a “digital coin”, and Libra from Facebook was presented as a “solid cryptocurrency”. Ironically, this may be one reason why the regulators of the world are so excited about the latter.
However, although JPM Coin and Libra differ in structure, in both cases, the experts on decentralization quickly threw them off, because it is not a “cryptocurrency”and “virtual money” or “digital currencies” – primarily because they are run by corporations, so they are centralized. Unfortunately, all is not so simple. While decentralization is the core ideology of cryptocurrencies, some of them may be centralized, at least to a certain extent.
So, cryptocurrency is digital or virtual currency (there are subtle differences between these concepts will be described further in the article), created with the use of cryptography, making it extremely safe and immutable. Most altcoins are based on the technology of the blockchain – a distributed registry that supported a decentralized computer network. However no cryptocurrency blockchain is technically also possible. For example, Digicash is one of the earliest varieties of cryptographic electronic payments, which appeared in the early "nineties" and had no blockchain.
Still more complicated by the fact that in the usual modern (based on blockchain) cryptocurrency also has subcategories: for example, NEO – coin, while the Coin Binance (BNB), despite the name, it is a token. As you can see, in Cryptoprotected a lot of confusion around these concepts, and we will try to clarify.
Read on: the Founder of Monero endorses the launch of cryptocurrency from Facebook and JPMorgan Chase. Why?
What is a coin?
Digital currency with a private bacchanal.
Bitcoin (BTC), Monero (XMR) or an Ether (ETH) are examples of cryptocurrency “coin”. What they have in common? They all exist in their own independent registries: the BTC operates in the original blockchain Bitcoin ETH is used in the blockchain of Ethereum, there is the XMR Monero blockchain and so on. All of them, you can also send, receive or mine.
As the name implies, the coins usually have the characteristics of money: they are fungible, divisible, portable, and limited in offer. Therefore, it is implied that cryptocurrency coins can be used much like physical cash: for payment for goods and services (although adoption is fairly slow).
There are also alternative cryptocurrencies, or so-called “altcoins”, which received this name due to the fact that they resemble an alternative to Bitcoin – the first and largest cryptocurrency. Many altcoins are a fork of Bitcoin and developed using its open Protocol – as in the case of Litecoin (LTC) and Dogecoin (DOGE). However, the above ETH and XMR is also called Althingi, although they are built on entirely new blockchains. It is possible to ask the question: is a crypto coin with a private bacchanal that is not Bitcoin? If the answer is positive, then it is Aldon.
What is a token?
The digital asset that can be used in the ecosystem of a project.
The main difference between tokens and coins that need to operate in a different blockchain platform. Platform Ethereum is most often used to create tokens, mainly due to the ability to create smart contracts. Tokens created in the blockchain of Ethereum, commonly known as ERC20-tokens. For example, the most popular stablein Tether (USDT). Of course, for the tokens, there are other platforms like NEO or Waves.
The task token is different from the coins, although they can also be used as means of payment.
Many tokens are created for use in decentralized applications (dApp) and their networks. However, they are called “utilitarian”tokens. Their main task is to provide the holder access to features of the project, as in the case of Basic Attention Token (BAT). BAT is ERC20-token (on the Ethereum blockchain), established to improve digital advertising. Advertisers buy ads BAT for tokens, which are then distributed among the publishers — as a rule, sites, and users browsers as compensation for advertising and viewing.
Useful facts: Decentralized apps useless? The results of research and expert opinion.
There are also “licenzirovanie securities”that in fact represent investment in the project. Although their cost is due to the team of a startup, they do not give the holder the right of ownership in a startup. These tokens buy only with the idea that their value will increase in the future, – this, unfortunately, was all boom of primary offerings of coins (ICO). Then people bought licenzirovanie securities issued for utilitarian tokens. Typically, securities are subject to strict regulatory oversight and policy to comply with “know your customer” (KYC), which on the market ICO was not.
What is the difference between virtual and digital currencies?
No. One of these terms are more abstract, while the other is quite specific.
In fact, it is much easier than with tokens and coins. “Digital currency” is a General term used to describe all kinds of electronic money, whether virtual currency or cryptocurrency (no, this is not the same thing).
The concept of digital currencies were introduced in 1983 in a scientific article David Choma. He later implemented this concept in the project Digicash.
Determining quality of the digital currencies is that they exist only in digital or electronic form and — in contrast to physical dollar bills or coins are intangible. They can keep and spend only online through e-wallets or ad hoc networks. Usually there are no intermediaries (banks), so that transactions occur instantly, and the fee is low or nonexistent. The good news: digital currencies and digital money are one and the same.
So: coins, tokens and virtual currency, all of this digital currency.
Virtual currency is a different beast, although they are digital by definition. How to define this term in 2012, the European Central Bank, virtual currency is “digital money in an unregulated environment, manufactured and controlled by their developers and used as a payment method in a particular virtual community”. An example of a virtual currency not based on cryptography, can be money, integrated into video games. For example, tokens, World of Warcraft, cash cards GTA Online, or points in the game FIFA from EA Sports. They usually exist in the ecosystem of the respective game and are used to gain access to bonus content such as new game objects or animations.
Thus, unlike conventional money, or even certain digital currencies, virtual currency may not be released by the Central Bank or other banking regulatory authority – which explains their inherent volatility. Consequently, virtual currencies should not be confused with cryptocurrencies, although they both belong to the category of digital currencies.
This is a universal definition?
No, given that this space is constantly evolyutsioniruet.
Cryptocurrencies as we know them, existed for only 10 years, most government agencies have begun to pay attention to them only 3-5 years ago, when the popularity of Bitcoin began to rise sharply along with the cost. Remarkably, Libra from Facebook again excited the financial Supervisory authorities: some countries are now creating working groups for discussion of Libra and its regulation.
Thus, the definition of cryptocurrency varies in different jurisdictions or even within jurisdictions: only US five different agencies take different approaches to cryptocurrency depending on their competence. For example, the IRS considers most cryptocurrencies and virtual currencies as property, the Commission on securities and exchange Commission believes that they constitute securities, and the Network to combat financial crime believes that cryptocurrency is money. Japanese legal and regulatory framework for cryptocurrencies – the Law on payment services – defines cryptocurrency as a valuable property, and the head of the Russian Central Bank once called Bitcoin a “currency substitute”.
Moreover, since the space evolyutsioniruet with great speed – and since the regulators generally it is not ripen – it is reasonable to assume that in the future there may be new terms for digital currencies. Because of this, it is particularly important to understand at least that we have now.
In our cryptodata millionaires you will find a lot of other useful information. Look.
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