Tokens and coins are often used as synonyms and are considered by many people as interchangeable. But they refer to two completely different concepts. So why are they easily confused, what is the crucial difference between them and what makes them different than shares? To answer this question, we’ll start by defining each of the aforementioned terms.
What Are Coins?
Coins are also often called altcoins or alternative cryptocurrency coins. They are digital money, created using encryption techniques, that store value over time. It is basically a digital equivalent of money because coins have the same characteristics as money: they are fungible, divisible, acceptable, portable, durable and have limited supply. Most ambitious crypto enthusiasts insist that coins will replace conventional money in the future.
Coins are directly related to a blockchain, such as Bitcoin, Ether or XIN. Each of these coins belongs to a separate blockchain; a public and distributed digital ledger, where all transactions can be seen. In other words, they own their own blockchain.
What Are Tokens?
Tokens are created on existing blockchains. Everyone has the opportunity to create their own token on a chain, which can stand for different values. These values can include physical things such as a house or a car. They can then be traded with the help of smart contracts.
Tokens are digital assets, issued by the project, which can be used as a method of payment inside the project’s ecosystem. It may perform the functions of a digital asset, represent a company’s share or give access to the project’s functions.
A ticket to a concert, for example, is a “real-life token” . You may use it at a certain time and place. You can’t go to the restaurant and pay your bill with the concert ticket ; it has its value at a concert hall. Digital tokens are the same ; they have certain use inside certain projects.
What Are Shares?
A share is a part or portion of a larger amount, named asset, which is divided equally among a number of people. So if an organization with 159 clients wants to invest in AirPods that cost 159 US-Dollars, each client receives a share of 1 US-Dollar. If the value of these AirPods were to increase, all shareholders would receive dividends. This amount would be added to the value of the individual share.
Shares work similarly to joint-stock companies: a joint-stock company is a business entity in which shares of the company’s stock can be bought and sold by shareholders. Each shareholder equally owns company stock, which can be verified by their shares in form of certificates of ownership. Moreover, shareholders are able to transfer their shares to others without any effects to the continued existence of the company.
The original founding members received shares pro rata and are trading them now on the Infinity Economics platform. Anyone who acquires shares there, thus receives the status of a founding member, even if he was previously not one. The shares entitle the owner to benefit from the distribution of the IE platform fee income.
The Definition of Dividend Tokens
Apart from payment tokens, the other token types for an investment contract are in a common affair and stand for the promise of residual income. These tokens are called dividend tokens; the kind of token that promises a share in the profit of the organization.
Some organizations share their profits by distributing dividends to owners of their tokens. Even some blockchains have dividend-like traits.
Similar to shares, token with dividend properties may or may not have a voting right. However, unlike stocks, dividend tokens empower the holder to passive income without necessarily having to exercise ownership of the organization.
Summary: How Different Are Coins, Tokens And Shares?
Coins are a method of payment; they are currencies that can be used for buying and selling things. They have their own blockchain and operate independently. Tokens, on the other hand, are sub-currencies, which are based on an already existing blockchain. They may present a company’s share and/or give access to a product or service. You can buy a token with a coin, but not vice versa.
On other platforms, there are asset tokens. However, we found this to be useless and thus created them as asset and shares on our own platform.
All coins, tokens and shares are considered as cryptocurrency. According to the definition, currency is a medium of exchange, unit of account or a store of value. So coins, tokens and shares – different kinds of units created using cryptography – are named cryptocurrency.