While exploring the world of crypto, you have probably come across both cryptocurrencies as well as tokens. Both of them are arguably the biggest type of digital assets within blockchain but a lot of confusion is surrounded what they exactly are.
What are digital assets
When just starting out, its good to know the difference between digital assets, cryptocurrencies and tokens. As these are regularly used interchangeable.
Digital assets are non-tangible assets that can be traded and are stored digitally. In the context of blockchain technology, Tokens and cryptocurrencies are considered digital assets.
What are cryptocurrencies
Cryptocurrencies are the native digital assets that are built on there own blockchain. They are directly issued by the blockchain protocol they run on and due to it, are often referred to as the blockchain’s native currency. Examples of cryptocurrencies are: Bitcoin on the Bitcoin blockchain, Ethereum on the Ethereum Blockchain and Solana on the Solana Blockchain.
What is a token
Tokens are, just like cryptocurrencies, digital assets. They are built upon a existing blockchain network, like the Ethereum network or Bitcoin network. With this, the crypto tokens can have the same functionalities or differing functionalities from the cryptocurrency of the blockchain it runs on. Examples of tokens include: Golem and Aave on the Ethereum blockchain and BUSD on the Binance blockchain.
When comparing the two, the main difference lies in the fact that a cryptocurrency is built on its own blockchain network. Whereas a crypto token is built on an existing blockchain network.