Categorization of Cryptocurrencies
It is important to know that all coins or tokens are included in the boundary of cryptocurrencies, even if a large portion of the coins do not function as a currency or medium of exchange. The meaning of cryptocurrency is a misnomer since a currency technically represents a value of medium of exchange. All these characteristics can be found in Bitcoin, and since the cryptocurrency was on hype starting from Bitcoin’s creation, any other coins launched after Bitcoin is generally considered as a cryptocurrency, though most do not fulfill the characteristics of an actual currency.
The commonly used categorization of cryptocurrencies is divided into Alternative Cryptocurrency Coins (Altcoins) and Tokens.
Altcoins
Alternative cryptocurrency coins also called as altcoins or coins as we call them. Altcoins basically refers to coins that are alternative to Bitcoins which means that the majority of altcoins are derived from Bitcoin. They are built using Bitcoin’s open-sourced original protocol with changes to its underlying codes, therefore deriving an entirely new coin with a different set of features. The concept of modifying open source codes to make new coins is called hard fork.
There are other altcoins that was not derived from Bitcoin’s open-source protocol but by creating their own Blockchain and protocol. Examples of these coins include Ethereum, Ripple, Bitshares, Neo and Counterparty. The common factors of all altcoins are that they each have their own independent blockchain, where transaction occurs.
Tokens
Tokens represents a particular asset or utility, that exists on top of another blockchain. Tokens represent any assets that are replaceable and tradeable.
Making tokens is a much easier process as you do not have to modify the codes from a particular protocol or create a blockchain from nothing. All you have to do is follow a standard open-source template of the blockchain such as on the Ethereum that allows you to make your own tokens.
Summary
The main difference between altcoins and tokens are their structure. altcoins are distinct currencies with their own separate blockchain while tokens work on top of a blockchain that simplifies the creation of decentralized applications. The majority of coins that exists are tokens, since they’re much easier to create.
