Cryptocurrency – Intro
Cryptocurrencies are forms of digital or virtual currencies. They are encrypted using cryptography. The world of cryptocurrency has entities called “Coins” and “Token”. Quite often the words “coins” and “tokens” are used as synonyms and considered as interchangeable references. However, in reality, they represent completely different concepts. They form part of the digital currency world and do not represent the real currency.
A token is a digital / trade asset or usually offers a utility and is built on top of an existing blockchain. A token has a special purpose on the project. A token can be used as a method of payment inside project’s ecosystem. Eg: Ticket to a concert, We Power (WPR) – electricity. One can buy a token with a coin and not vice-versa.
It is relatively easy to create a token than creating a coin, as neither new code needs to be generated nor existing one modified. A standard template from platforms like Ethereum (blockchain-based) are taken and anyone can create tokens in just few simple steps. A template fulfils the feature of interoperability of tokens, enabling the users to store different tokens in the wallet. Tokens are often used to activate features of the application they were designed for. Most tokens exist to be used with decentralized applications, or dApps.
Coin is currency, used for buying and selling of things. In Cryptocurrency terms, a coin is digital or virtual money, which is created using encryption techniques. Eg: Bitcoin, Ethereum, NEO. Coins are methods of payments and operate independently. A coin has its own standard in blockchain. Coins have some characteristics like
– They are portable, divisible, acceptable, durable over time, fungible
– Can be sent over network, received and mined for future
– Have no other special feature other than act like money
– Always tied to a public blockchain
The complete process of building an entirely new blockchain and launching a coin is considered to be more complex and time-consuming.
ERC20 Vs NEP5 Vs Zcash Vs Monero
ERC stands for Ethereum Request for Comment and 20 stands for the unique ID – number to distinguish this standard from other standards. Ethereum based distributed application tokens, follow a very common token programming standard called ERC20. ERC20 is a protocol standard that defines certain rules and standards for issuing tokens on Ethereum’s network. 99% of all deployed Ethereum tokens follow this standard, which is a standard set of programming “rules”. ERC20 tokens must and should have the following functions to meet the standard
Prior to ERC20, most start-ups used their own standard for implementing the tokens on Ethereum network. ERC20 comes with few benefits like
– Decreased Risk of contract terminations
– Type of implementation of the tokens became easier and reduced the complexity of understanding the standards
– ERC tokens – easy liquidations
– Brought in uniformity of protocol standards and technology know-how
There are over 20K ERC20 token contracts available today. Eg: EOS, TRON, ICON etc.,
NEP stands for “NEO Enhancement Protocol”, the number 5 is the version. Some of the popular NEP 5 tokens are ONT, DBC and NEX. The NEP5 protocol ensures that minimum security is ensured when the tokens interact with blockchain or other tokens. NEP5 standard ensures that the following methods are defined.
– balanceOf(byte account)
– transfer(byte from to, BigInteger amount)
The types of NEP5 available currently are standard, informational and meta types. NEP5 standard is developed to make the NEO ecosystem to work promptly and error free. It was developed to beat the Ethereum. It is known for its innovative approach and thereby helps the developers to generate more and more tokens seamlessly and faster. The quality of NEP tokens is doubly ensured and the interaction with other exchanges goes flawlessly and faster. NEO tokens are transferred smoothly. NEO provides facility of wallets like NEON Wallet, NEO tracker and NEO Wallet, which are seamlessly integrated with NEP5 standard.
NEP5 vs ERC20
– The cost of developing a NEP5 tokens is more than ERC20
– NEO, it is quantum-ready, Ethereum is still vulnerable to quantum computing.
“Zcash is another blockchain and cryptographic money which permits private exchanges (and by and large private information) in an open blockchain”–Zooko Wilcox, Founder and CEO of Zcash.
Zcash was earlier called Zerocoin. Zcash is built on Bitcoin platform. Zcash uses a custom built zero-knowledge proof construction called a zk-SNARK in order to help protect the privacy of the users. Zcash uses the underlying technology of Bitcoin and enables the user to make their transactions untraceable, thereby able to protect the privacy. Zcash has launched itself into the Private coin market. Rather than directly validating the sender and receiving addresses, Zcash is able to validate a transaction without revealing any of the underlying information. Zcash’s Shielded transactions encourages users to use ZEC to protect their assets. This makes Zcash and other privacy coins a good choice as a hedging asset. Zcash is considered to be centralized and a true representation of a privacy coin.
From an investor perspective, Zcash has drawn attention due to the following reasons
– Market sentiment and confidence on private coins
– Privacy protection – state of the art
– Zcash development team comes with a sound experience in Cryptocurrency
Monero is one of the most popular cryptocurrencies in the world because of its ability to provide anonymity. It provides as much privacy to its users as possible using innovative tools like “Ring Signature”, a ring signature is a type of digital signature that can be performed by any member of a group of users that each have keys. The Monero ledger only records the one-time address and doesn’t link the sender or the recipient. Monero network verifies the balances in individual users wallets. Monero’s primary price drivers are availability and usability, most notably on the dark web. Issues like traceability and design errors exist with Monero. Bithump’s move gave Monero the opportunity to break into the South Korean markets which was a huge boon. Due to the use of ring signatures, it is very difficult to prove who actually owns a Monero token. This means that certain token holders may seek to use Monero to protect their profits from taxation or to prevent states from seizing their funds should cryptocurrencies be made illegal.
Monero is attracting the investors due to the below reasons
– It is becoming the leader in privacy coins
– Upgrades are regular, on average for every 6 months, the Monero protocol adds upgrades and new technologies through hard-forks that are anticipated network-wide, unlike Bitcoin and Ethereum who have not issued many upgrades
– Dark market acceptance as a payment
Digital coins and tokens are both important for the cryptocurrency market. Knowing the difference between crypto coin vs. token is essential for understanding the goals and challenges of various project teams. Having this technical knowledge can help potential investors to better evaluate both ICOs and existing cryptocurrencies. Also, the usage, buy and sell of the crypto coins and tokens is increasing every day and is expected to grow at a rate of 32%