Coins vs. Tokens
In the context of web3, a coin, and a token are both types of digital assets that exist on a blockchain network, but they have some key differences.
A Coin is a type of digital asset that is native to a specific blockchain network like $BTC is to Bitcoin, $ETh is to Ethereum, or $ADA is to Cardano. Just like how dollars are used as a form of currency in the physical world, coins are used as a form of currency in the digital world. So, if you're using a blockchain network that uses Bitcoin, for example, then you would use $BTC as the currency to pay for things on that network.
A Token, on the other hand, is a digital asset that is created on top of an existing blockchain network, like Ethereum or Binance Smart Chain. Tokens are usually created using a smart contract, which is a type of computer code that runs on the blockchain network. Smart contracts can be programmed to do a variety of things, such as create and manage tokens. Tokens can represent anything from a physical asset like gold or real estate to a digital service like a membership or access to a platform.
The process of buying a coin versus buying a token can differ depending on the specific blockchain network and cryptocurrency exchange you use. However, there are some general differences to keep in mind.
Buying a Coin: To buy a coin, such as Bitcoin or Ethereum, you typically need to follow these steps:
Set up a cryptocurrency wallet: You'll need a digital wallet that supports the specific coin you want to buy. There are different types of wallets, such as hardware wallets or software wallets, and you can choose one that fits your needs.
Choose a cryptocurrency exchange: You'll need to find a cryptocurrency exchange that supports the coin you want to buy. There are different exchanges available, such as Binance, Coinbase, or Kraken, and each has its own user interface and fees.
Create an account: Once you've chosen an exchange, you'll need to create an account and verify your identity.
Fund your account: You'll need to deposit fiat currency or another cryptocurrency into your exchange account to be able to buy the coin.
Buy the coin: Once you've funded your account, you can place a buy order for the coin at the current market price or set a limit order at a specific price. Once your order is filled, the coin will be added to your exchange wallet.
Buying a Token: To buy a token, such as a utility token or a governance token, you typically need to follow these steps:
Set up a cryptocurrency wallet: You'll need a digital wallet that supports the specific blockchain network the token is built on. For example, if the token is built on the Ethereum blockchain, you'll need an Ethereum-compatible wallet.
Choose a cryptocurrency exchange: You'll need to find a cryptocurrency exchange that supports the token you want to buy. Some popular exchanges that support a wide variety of tokens include Uniswap, PancakeSwap, and SushiSwap.
Connect your wallet to the exchange: You'll need to connect your wallet to the exchange using a wallet connector like MetaMask.
Fund your wallet: You'll need to deposit the cryptocurrency that the token is traded against into your wallet. For example, if the token is traded against Ethereum, you'll need to deposit Ethereum into your wallet.
Buy the token: Once you've funded your wallet, you can go to the exchange and place a buy order for the token at the current market price or set a limit order at a specific price. Once your order is filled, the token will be added to your wallet.
Overall, the process of buying a coin versus buying a token can be similar in some ways, but the specific steps and foundations vary depending on the cryptocurrency exchange and the blockchain network the coin or token is built upon. It's important to do your research and choose a reputable exchange and wallet provider, and to understand the risks and potential rewards involved in buying and holding different cryptocurrencies.