The cryptocurrency ecosystem has grown exponentially over the past few years, and it has grown so rapidly that it may be difficult for newcomers to understand the different uses of cryptocurrencies.

After reading this article, you will have mental models that you can use in the face of new blockchain projects.

What is the difference between Token and Kevin?

Coins are assets that are built on their own blockchain; Tokens, on the other hand, are assets that are built on another blockchain. An example of a coin is Bitcoin on the Bitcoin blockchain and Ether on the Ethereum blockchain.

 An example of a token is Tetra, which acts as a Layer 2 token on multiple blockchains, or Uni Swap (LINK) tokens, which are located on the Ethereum blockchain. 

Making tokens on the Ethereum blockchain is very common and these tokens are called ERC-20 tokens. Some tokens are released on their own blockchain after they have been spread and completed on the blockchain.

 For example, the BNB token was first built on the Ethereum blockchain and later developed into its local blockchain.

It should be noted  that in many published articles and videos, the two terms are often used interchangeably; But in fact they are technically different.

 The difference between Coin and Token is technical; But we can classify them into different categories based on their applications. However, many applications There are two main categories of tokens securities (Security Token) and tokens application (Utility Token) are.

Security Tokens

Securities are financial assets that are tradable. The ” Howie test ” can be used to determine the value of an asset: “A contract or transaction or plan by which a person invests his money in a trading company and expects only profit from the efforts of the sponsor or a third party. It becomes.

This test is often expressed simply as follows:

• Has the financial investment been made?
• Is the money invested in a trading company?
• Is there any expectation of profit?
• Are the profits made solely from the efforts of the sponsor or a third party?

Examples of tokens tokens securities in the initial public offering of securities (STO) and the website icholder and coincodex can see a list of them. Bitcoin is not a valuable token; Because money is not invested in a trading company.

Equity Tokens

A stock token is a type of stock token that acts like a traditional stock and includes the stock of a company or a third party or venture capital and derives its value from the success or failure of the company. 

Like other shares, the holders of this token literally own a percentage of the company’s stock, benefit from the company’s dividends, and have the right to vote on the company’s future. The only significant difference between stock tokens and traditional stocks is the way they are owned. 

Traditional stocks are registered in databases and have a stock certificate (stock slip) and stockholder token ownership information is stored on the blockchain.

Asset-Backed Token

Assigning assets makes them tradable. Tokens can be traded instead of the asset itself. This is like paper money, and instead of trading gold, you can trade paper that represents a certain amount of gold.

The issuance of asset-backed tokens is unsupervised; Of course, the token issuer can claim that this token has any kind of support; But without a real inspection, this claim has no value. Among the assets that can be tokenized are:

• Precious metals: PAXG and DGX are two examples of gold-backed tokens.
• Company shares: Instead of trading company shares through reputable brokerages, this can be done through cryptocurrency tokens.
• Other commodities: Petro  Token  (XPD) claims to be backed by oil and mineral reserves. 
• Real Estate:  There are several tokens that represent real estate and several countries are looking to offer real estate in the form of cryptocurrency tokens. IHT Coin has taken a step in this direction; But it seems that it is not ready yet. The idea is very relevant, but not yet well presented.

Utility Tokens

Securities are traded with the expectation of making a direct profit; But in return, functional tokens are expected to be useful. For example, the File Coin (FIL) or SIAquin (SIA) token is used to store the file and the Civic (CIV) token is used for authentication. In the real world, gift cards or public transportation tickets are examples of practical tokens. Other examples of functional tokens are the BAT and Golem tokens.

Non-Exchangeable Token (NFT)

^{Beeple’s “First Wave”}

All coins and most tokens are interchangeable. If you have one dollar bill, it does not matter which one you spend. However, if you have collectibles such as comics or stamps or basketball cards, they are different. Van Gogh’s famous work is different from any other work. There is an equivalent in the world of cryptocurrencies in NFTs. The idea is that only you can have that effect.

This feature is especially attractive for computer games where players spend a lot of money on rare objects and placing these objects on the blockchain allows players to monitor their assets. It may even be possible to trade these NFTs in different games.

NFTs are a paradise for digital artists; Because they can place their works directly on the audience on this platform without the need for intermediaries, and at the same time, the ownership of the work on the blockchain remains forever in the possession of the owner or buyer of the work.

Irreversible Token (NFT) can be built on the Ethereum blockchain using the ERC-721 and ERC-1155 protocols.

Stablecoin

StableCoin is the digital equivalent of Fiat currencies (unsupported currencies) and tries to always be priced in the currency of one of the countries (mostly US dollars). Stable coins are divided into three categories:

• Fiat Money Bail:  This is backed by Fiat Money. Examples are the US Dollar Tetra (USDT) and the US Dollar (GUSD).
• Cryptocurrency collateral:  This category is backed by cryptocurrencies, such as the DAI, which is backed by an Ethereum locked in smart contracts.
• Unsecured (Algorithmic):  These steel coins are dependent on smart contracts that keep the price constant by buying and selling stable coins.

It should be noted that some stable coins are not actually coins; They are tokens. There are two examples of StableCoin, TerraUSD and Steem Dollars, and two examples of Stable Token, Tetra and USD Coin, both of which are available on the Ethereum blockchain as ERC-20‌ tokens.

Value storage

There is only one asset in this category and of course this Coin did not decide to be in this category. Bitcoin was originally designed as a digital currency; But due to high transaction costs and changes in user expectations, it turned into something like gold or “value reserves.” Value storage is an asset that retains its value over time. Gold and other precious metals are valuable reserves; Because their permanence is certain. Bitcoin is used for investment and is not used for direct spending; For this reason, it has limited direct applications.

Digital currency

This category is what Bitcoin originally wanted to include; But today it is full of bitcoin derivatives and new technologies in this category are focusing on cheaper and faster transactions. Applications of digital currencies range from day-to-day purchases to massive cross-border activities and interbank transfers.

It should be noted that a large number of items in this category also offer smart contracts; But so far, because of the speed of transactions and use as a currency, they are in the spotlight. Important members of this category include Ripple (XRP), Light Coin, Bitcoin Cash, Stellar, Bitcoin Easy, Terra / Luna, Dash and Horizon.

Post-blockchain and exchange tokens

These tokens or networks were originally created as a solution to the problem of communication between different blockchain networks and the non-blockchain world and the transfer of assets between these mentioned barriers. These tokens include LINK, Casmas, Ren, Ikan, and Raven Coin .

Privacy token

As the name implies, these tokens try to store as much data as possible on a network or transaction or digital wallet anonymously. Although privacy tokens are sometimes accused of aiding and abetting illegal activities, users who want to protect their privacy have not done anything wrong. Monroe, Zigzag, and Verge are in this category.

Smart contracts and decentralized applications (DAP)

Smart contracts are certainly the most common application for blockchains and cryptocurrencies, and open many doors for specific applications and financial structures. Depp or decentralized applications (Decentralized Application) is a computer program that runs on a distributed computer system. 

Depots became popular with distributed general office (DLT) technology, such as Ethereum blockchain, and are often referred to as smart contracts. A smart contract is  a computer program or transaction protocol that automatically executes and monitors the terms of a contract or agreement. The goal of smart contracts is to reduce the need for secure financial intermediaries.

The most important use of depots is for decentralized finance, which revolves around depots that execute financial operations on the blockchain. Depots help users do the following:

• Borrowing money from others or lending money to them
• Buy on loan (Long) or sell on loan (Short)
• Trading coins and earning interest on savings accounts without the need for a centralized financial interface

Based on all the cryptocurrencies in this category, they try to replace Ethereum as the undisputed leader of this category. Other members of this long list include Cardano, Polkadat, Ayas, Alrand, Theron, Avalanche, New, Solana, Ethereum Classic, Matik, and more.

Lending and banking and profit cultivation

These tokens focus on lending and banking (savings accounts) without the need for trust and make it possible to cultivate profits through lending. In general, in profit-making, these tokens encourage users to stick to their network from other networks and offer it in return for their network tokens. These tokens include Ave, Meeker, Compound, Celsius, and Irene Finance.

Wrapped Tokens

Rapid tokens are designed to enable the use of cryptocurrencies in various blockchains, so that when a user is trading on a platform in another blockchain, he does not have to sell his assets. Rapid tokens are basically a special type of cryptocurrency whose value is equivalent to the value of another cryptocurrency (such as StableCoin).

 For example, bitcoin can be found raped in several other blockchains such as Ethereum(Wrapped Bitcoin) or Bainance (Bitcoin BEP2). You can get this bitcoin rapدر used them in special depots for investment and made a profit instead of just keeping them in a digital bag.

Exchange tokens

These tokens are primarily associated with cryptocurrencies, whether centralized (CEX) or decentralized (DEX). Ramzarz Exchange may issue its own token for a variety of reasons, often to encourage its users.

 In general, most exchanges use their tokens to increase the liquidity of the exchange and to encourage trade-related activities and to facilitate the governance process in the community of users of the exchange. The rise and fall of the value of these tokens depends on the success of the issuing exchange office.

Binance Coin (BNB), UNI Swap (UNI), Hobby Token (HT), Sushi Swap (SUSHI), etc. are among the cryptocurrency tokens.

Other tokens or coins

These are tokens or coins that have special uses and increase in value if they succeed in the use defined for them. Some members of this category are moving towards the main categories in the long run; But at the moment they have a special application. These tokens or coins include:

• Dodge Coin: Cryptography based on Internet Mimi
• THETA:  Decentralized video streaming
• VeChain:  Supply Chain Support
• IOTA:  IoT support
• Filecoin: Decentralized hosting
• Graph: Indexing a decentralized search
• BitTorrent:  Implementation of the BitTorrent protocol on the blockchain platform
• Basic Attention Token: An  alternative to web marketing and advertising
• Decentraland: Decentralized  virtual reality platform
• Enjin Coin:  Video game items and in-game economy
• Siacoin: Decentralized file hosting
• Stacks: A plug-in within the Bitcoin network

When faced with new projects in the world of cryptocurrencies, you can ask yourself these questions:

• Is it Token or Kevin? If it is a token, which blockchain does it use? Has the project started from Ethereum, for example, and decided to move to its own blockchain in the future? This question can give you an insight into what security issues you will encounter with Coin or Token. You can also find out how much work this project will take to complete and whether the significant costs of Ethereum and Ethereum 2.0 will not be a problem for it.

• Choice between one of the main groups (mentioned above): Is this project digital currency, exchange token, smart contract, NFT, asset-backed token, application token or something else? Answering this question can help you understand the impact of regulations on the project and its applications to users.