In the world of blockchain, two concepts are often confused — cryptocurrency and token. At first glance, they seem similar, as both exist in digital form, but the difference between them is fundamental. Let's sort it out.
Cryptocurrency
This is a digital currency that operates on its own blockchain. Its main purpose is to serve as a medium of exchange, a unit of account, and a way to store value.
Examples:
-Bitcoin (BTC) — the first cryptocurrency created as an alternative to traditional money.
-Ethereum (ETH) — a powerful network supporting smart contracts, with ETH remaining the native currency of this network.
Cryptocurrency is the foundation of the blockchain network. It is usually used to pay fees and operate the system.
Token
A token is a digital asset created on an already existing blockchain. It can be easily created using a smart contract and can perform many tasks — from project governance to providing access to platform functionality.
Examples of tokens:
-USDT, USDC — stablecoins pegged to the dollar.
-UNI (Uniswap), AAVE — provide access to decentralized protocols.
-MKR — used for voting in the Maker DAO project.
The main difference
Cryptocurrency is like an operating system (for example, Windows or Android). A token is like an application that runs on this system.
Cryptocurrency launches the network and supports its operation. A token uses an already existing network for its tasks.
Having understood this, it is easier to comprehend how different assets work and what they are capable of.
