Currencies and Tokens overview
Hundreds of cryptocurrencies are being developed by their creators and the community. Cryptocurrencies and tokens each have different technological solutions or overall project visions, and these differences is what sets them apart. Among the most known among them are Bitcoin, Litecoin, or Ethereum, but there are many others which are just as significant – Dash, Monero, Stellar Lumens, Cardano, etc.
Take a look at the overview of important cryptocurrencies and tokens and information about their characteristics, including prices, charts, where to buy them, and in which hardware wallet to store them securely. If you are curious, for example, about what tokens are and how they are different from cryptocurrencies, take a look at the FAQs at the bottom of this page where you will find answers to other frequently asked questions about cryptocurrencies as well.
Their main goal is to fulfill the role of a payment tool – that is, to facilitate fast, low-cost transactions. This is what their development centers on.
Tokens play the role of a „driving force“ on specific platforms, for example for running smart contracts or decentralized applications, and they fulfill other specific tasks within the particular platforms.
Cryptocurrency is a type of digital currency or electronic money. It is primarily characterized by its lack of a central authority which influences the total amount of the currency, inflation, etc., as is the case with regular currencies where central banks can direct currency circulation and the amount of money available (currently, this is done exclusively by printing new banknotes, which devalues your savings). At the same time, a concensus exists about the cryptocurrency‘s value and the will to accept it as a value.
Cryptocurrencies usually have a firmly determined maximum number of coins and a timetable of their release. Transactions are usually recorded in a so-called blockchain; the computing power of miners ensures that is cannot be retrospectively changed. This way, no one can rewrite a transaction and the already completed transactions can be looked up in the blockchain. This ensures complete transparency.
In a wider sense of the word, tokens could be classified as cryptocurrencies as well, but their function is different (see below).
Decentralization – there is no central authority, no central bank. The currency cannot be controlled by a government or any other institution.
No intermediary – cryptocurrencies are sent directly, without any intermediaries or banks. Users communicate directly via P2P networks, that is, directly with one another.
No borders – you can send them immediately from one end of the world to another, or to a person in your immediate vicinity (even on weekends, on a holiday, simply anytime). This eliminates concerns such as quickly sending money on Friday so that they would (in the 21st century) arrive to a different account by Monday afternoon... and let’s not even mention sending money to a different country. You simply send a cryptocurrency and the recepient can start using it almost immediately, even if they are at the opposite corner of the world.
Unbreachable – strong encryption ensures that it cannot be breached.
(Pseudo)anonymous – no personal or sensitive information is attached to transactions, only in certain cases and to a limited degree.
Low or no transaction fees – low or even no fees are charged for completing transactions.
A token usually serves as a payment tool on a specific platform or in a specific application to which it is tied. In a practical sense, token are created when developers establish a platform with its own tokens; these are necessary for the correct functioning of the platform. These new tokens do not have their own blockchain; however, they represent an extension, or a „driving force“ of the application created on the basis of an already existing blockchain.
Cryptocurrency – its primary purpose is to serve as generally accepted means of payment or a store of value („replacement of classic money“). The basic prerequisite is decentralization (that is, no central authority), a pre-determined maximum number of cryptocurrency coins or the method of their release. An example of cryptocurrency is Bitcoin, Litecoin, Zcah, Dash, Monero. Cryptocurrencies very often utilize the proof-of-work method for verifying transactions.
Token – function within a particular platform which was created for a specific purpose. This is for example the Tron platform with its Tronix token. Tokens are used for running decentralized applications or smart contracts. They are not cryptocurrencies in the true sense of the word because their main purpose is not to serve as a generally accepted means of payment. Examples of tokens are Binance Coin, Cardano, EOS. Tokens very often use the proof-of-stake method for verifying transactions.
A smart contract is a protocol which can be used to enforce what the protocol’s author is expecting. For example, this can be a transfer of shares, exchange of money without interference from lawyers or notaries, or concluding a contract or an agreement. The blockchain system ensures that the protocol cannot be retrospectively changed in any way; that is, once the smart contract is concluded, it cannot be changed in retrospect (falsified) which is an important attribute of smart contract. A smart contract, once concluded, can of course have future-oriented changes made to it, for example if both contractual parties agree on such changes.
These are two different methods for verifying transactions in a network.
Proof-of-work (PoW) system (or protocol, function) is a method used by a payment system user to prove the value of a payment tool by showing completed work.
Currently, this system is often used in conjuction with cryptocurrencies and the use of computing power by the miners of certain cryptocurrencies for the purposes of creating blocks (blockchain). This system prevents so-called double spending when the miner’s computing power decides whether it was he who had mined the block and whether he would receive the reward for mining it. The computing power of the entire network also prevents retrospective changes from being made in the blockchain, because in order to make such a change, someone would have to have the 51% of the computing power of the entire network at their disposal.
Proof of Stake (PoS) is a system of reaching concensus when establishing the ownership of a specific amount of currency in certain cryptocurrencies when creating blocks. Block creation in cryptocurrencies which use PoS helps prevents the problem of multiple spending. In PoS, this is achieved by reaching a concensus about who discovered the last block. The more cryptocurrency a miner owns and the longer they have owned it, the bigger their chances of receive the reward for the discovered block. This is why cryptocurrencies which use Proof-of-Stake are more suitable for investors because with Proof-of-Stake you can profit from already owning some cryptocurrency.
Proof-of-stake is used for example by Cardano.
- Unlike proof-of-work, it consumes a low amount of energy
- Typically, there is no inflation (= devaluation)
- No investments into high-performance hardware
- Low reward for blocks (only fees)
- In order to prevent 51% attacks, high market capitalization is required
- Not suitable for emerging cryptocurrencies