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Token ICO: What Is Its Different From Cryptocurrency?

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13.09.2018
Token ICO: What Is Its Different From Cryptocurrency?

Introduction

Cryptocurrency comprises of two terms which are crypto and currency. Currency is generally understood to be a medium of exchange. And crypto was coined from cryptography which involves encrypting the details about the transfer of transactions. Since the inception of the first cryptocurrency “bitcoin” in early 2009, the market space has experienced enormous growth from an increase in market cap, which presently is around $700billion. You might begin to wonder how bitcoin won the heart of many since most people thought of it as a fad when it first got launched. This is mostly due to its system of operation, which uses an open ledger system, which encrypts transaction in a chronological order called blockchain. The emergence of bitcoin led to the sprouting of other members of it habitat which are referred to as coin and token. For you to have a broader understanding on how cryptocurrency got to this point, we will need to establish a basic knowledge of coin and token.

Cryptocurrency: Coin And Token

For us to get the differences between coin and token. We need to explore their core concept and functions in the digital market. It might appear a little tricky since they’re both captured under the same umbrella – cryptocurrency.

Coin

It is essential to establish that other cryptocurrency existed before the inception of bitcoin, as stated above bitcoin won the heart of many due to its blockchain system of operation. This grand concept led to the creation of other types of cryptocurrency, which are regarded as altcoins – an alternative to bitcoin. You can use the word coin interchangeably with altcoin. The altcoins are of two kinds based on their protocol of design. We have those that are dependent on the open-ledger system of bitcoin, with a few tweaks to it underlying codes. Mostly it comes out original, but its build-up is dependent on the core concept of bitcoin. Examples of these type of altcoins are litecoin, darkcoin, quark, yackcoin, novacoin, and so many.

The altcoins that stem out from bitcoin’s open ledger system have features that differentiate them from one another. For instance, there are specific monetary policies that serve as a guiding tool when utilizing some of the altcoins. These policies are tailored towards how to use the coins for transactions. Especially in cases of saving, buying and receiving, there are specific amounts that you can use for purchases, which correct instances such as hoarding of cash in the digital market. There are cases where altcoins serve the purpose of reducing the use of systems with GPU and ASIC for mining. Since the altcoins come with a speedy transaction process, take for example litecoin is four times faster than bitcoin, which implies that it can perform 10,000 transactions in a second. There is no reason why a miner would need systems with a heavy processor for such fast processing altcoin.

Some altcoins are very much independent from the platform of bitcoin. They make use of it neither blockchain, protocol or codes. They have their distinctive blockchain platform, and they make use of their native currency for transactions. We have several of them but the popular ones, that readily comes to mind is Ethereum and Omni. Ethereum uses its open source, blockchain system as a computing platform with the use of it smart contract. This system helps to nullify third parties out of the equation by making the transaction a two-way thing. Investors and industries in the global digital market embraced these ideas. Despite some few shortcomings from ethereum, especially concerning it scalability level. It is not purposed to be used for transactions, and that is why it has no cryptocurrency instead of what it offers is a token which is known as ethers.

Token offers a broader advantage and use compared to cryptocurrencies. It helps you to explore different functions the altcoin you’re using has to provide. For example, you can use ethers for computational services and as a means for trade on the platform. There are other tokens, which are streamlined mainly for business just like cryptocoins.

Token ICO

ICO has taken over the center stage in the virtual industry. The only unregulated method through which an organization can start-up their project or get support for their project. It is very much similar to the IPO we have in the financial industry where shares are offered to investors to gain support for the company. The significant difference is that IPO is regulated and controlled through governmental policies. During the launch of an ICO, investors support the project by investing, in anticipation to get cryptocurrency in return for their contribution. Most tokens are very much dependent on the blockchain technology of ethereum, to create their decentralized apps. The has massively contributed to the surge we’re now experiencing in the number of token ICOs we have in the industry. One example is the Golem project, which is solely based on the use of the ethereum blockchain technology. The GNT tokens will have to make use of the ether tokens since it’s based on the ethereum blockchain.

An apparent difference between cryptocoin and ico token is independence. Picture this, cryptocoins like bitcoin and litecoin are independent of any other platform, since they own their blockchain and comes with different protocols. But Token ICO is dependent on the blockchain technology of its host platform. If the host platform should falter or gets disrupted, then it has a substantial effect on the token ICO. There is no denying that cryptocurrency such as etheruem removes the laden of token ICOs developing their blockchain technology from scratch, but it sure has some ripple effects.

Conclusion

During this write-up, we’ve come to the understanding that cryptocurrency coin uses an encrypted form of media exchange to secure transactions. And there are two categories of altcoin, one based on the protocol and codes of bitcoin and the other with its distinctive design and system. The significant difference between token ico and cryptocoin is independence. Cryptocoin is not dependent on any host platform for its operation.

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