---
# System prepended metadata

title: Cryptocurrencies and Tokens
tags: [blockchain, erc20, cryptocurrency, erc721]

---

# Cryptocurrencies and Tokens

###### tags: `cryptocurrency` `erc20` `erc721` `blockchain`

### Introduction

I've seen most of the time people often confuse [Cryptocurrencies](https://ethereum.org/en/developers/docs/intro-to-ether/#what-is-a-cryptocurrency) with [Crypto-Tokens](https://ethereum.org/en/developers/docs/standards/tokens/#top) or vice-versa. It happens because both are generally used interchangeably. But they have some key differences.

> Cryptocurrencies are native to their blockchains, ie. ETH to Ethereum and BTC to Bitcoin. While crypto tokens are built upon existing blockchains.

### What are Digital Assets?

In a broader spectrum, **a digital asset is a non-tangible asset (no physical existence). It's created, traded, and stored in a digital format**. When we talk about [[Blockchain]], digital assets include cryptocurrencies and crypto tokens.

Cryptocurrency and tokens are unique subclasses of digital assets that use cryptography. An advanced encryption technique, which assures the authenticity of crypto assets by eradicating the possibility of counterfeiting or [double-spending](https://www.gemini.com/cryptopedia/double-spending-problem-crypto).

As I've stated, cryptocurrencies are the native asset of a blockchain. Whereas, crypto tokens are part of a platform or DAO. That platform is built upon existing blockchains, like many ERC-20 standard tokens.

### What is Cryptocurrency?

It's a native asset of a blockchain network, which is used for *trading*, serves as a *medium of exchange* & holds some *value*. **It is issued by the blockchain protocol on which it runs, hence called the native currency.**

Characteristics of cryptocurrencies:

- Decentralized, not dependent on a central issuing authority. Instead, they depend on code to manage issuances and transactions.

- Built on the Blockchain.

- Uses cryptography to secure its underlying structure and network system.

### What are Tokens?

> Can also be called crypto tokens. 

These are the units of value that some organizations built or working upon blockchain-based organizations releases. **They are built on top of existing blockchains**. While they can work or look similar to cryptocurrencies, *they are a whole different class of digital assets*.

### Coming on in-real-life examples

Revising fundamentals:

- Cryptocurrencies are native assets of a blockchain protocol. 

   - Eg. Ethereum Blockchain's native token is ether (ETH).

- Organizations create tokens. They use existing blockchains to build their tokens.

   - Eg. Tokens built upon Ethereum are **DAI**, **LINK** or ethers own wrapped version '**WETH**', used for trading ETH with ERC20 compatible tokens.

### Conclusion

Cryptocurrencies are native currencies issued by Blockchain protocols. Tokens are digital assets built upon pre-existing blockchains.

![Mind Map of Digital Tokens](https://i.imgur.com/9vbi2CJ.png)

:link: [Access the Mind Map here](https://whimsical.com/blockchain-KzdhyJSYmeVunLoqGmrwbg)

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Further reference in detail or doubts: DM me ;)

#### **Notes by [Sarthak Verma](https://twitter.com/srthkv)**