Those that are new to Crypto often use ‘Coin’, ‘Crypto’ and ‘Token’ interchangeably.
However, there are some notable differences.
A Crypto Coin
These are often used as a means of payment. A quick and easy way to remember what a coin is, is to look at the underlying objective of the Crypto. Bitcoin, ZCash and Ripple are examples of coins that facilitate payment. The underlying mechanisms sole purpose is to exchange one currency for another. The protocol of exchange is used and exchanged between two parties.
A Crypto ‘Token’
A Token differs from a coin. Usually, the Token is a by-product of a smart-contracting protocol i.e. Etheruem, a smart-Token creating language based on Solidity. This is used to create the underlying Token. Solidity code is written to issue these Tokens in exchange for funds or other Crypto coins.
A Token has utility usage, which is, to access a product or service or is used only within a created ecosystem. It is accepted only as payment and is needed to utilize that specific system. Usually Tokens and a DAO (Decentralized Autonomous Organization) can be synonymous, but one still needs to see the underlying objective of the Token. ‘Tokens’ may also contain property rights, that each divisible part is entitled to a reward, incentive, fee reduction or even a part of profits. I will not say distribution or dividend, as the SEC (Security Exchange Commission) may get excited, and call that Token a security, using the Howey rule — some Tokens exhibit an ‘equity’ feature i.e. TaaS. Tokens have value because of their underlying ‘usufruct’ and these are also tradeable on exchanges or peer-to-peer transactions.
Civic, 0x , Golem, Augur, Binance ,Gnosis, Monaco and TenX are Tokens.
Note
As Blockchain gains worldwide adoption, Japan and Australia have legislated Regulation on Coins and Tokens. Given these regulatory changes globally, the US is likely to follow in regulating Crypto Exchanges and Initial Coin Offering (ICOs).
Further readings on Regulation can be found here:
Australia follows Japan in move to Regulate Bitcoin
Congress Considering Validating Bitcoin
SEC: US Securities Laws ‘May Apply’ to Token Sales
About Hedge
At Hedge, we highly recommend that you consult an attorney before engaging in any coin or Token ICO.
We believe Crypto will become a mainstream, regulated asset. For this reason we are creating a hedging portal/platform where Exchange Traded Funds (ETF) and Indices will be traded. This has huge upside potential for extending our product to Institutional and Retail investors. We aim to be the first licensed ETF and Index provider and Platform.
