Investing in DeFi tokens and altcoins

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There are a lot of terms used in the world of cryptocurrency, which is why it can often be quite difficult and overwhelming for a beginner. There is no need to worry, though, as we have got you covered. Below, we will reveal everything you need to know about altcoins and DeFi tokens.

Is there a difference between a coin and a token?

The most common cryptocurrency categories are tokens and altcoins, otherwise known as alternative cryptocurrencies. 

It is vital to note that all tokens and coins are deemed cryptocurrencies, even if the majority of coins do not function as a medium of exchange or currency. 

These two do differ from one and other, though. Below, we will explain everything you need to know about both so that you can get a better understanding.

What are DeFi tokens?

A token will represent a certain utility or asset, which tends to reside on top of a different blockchain. A token can basically represent any sort of asset that is tradable and fungible, from loyalty points to commodities. 

A DeFi token or coin is much like a digital version of a fiat coin; the value is transferred in the course of the financial transaction. 

It is a lot easier to create a token if you do not need to amend the codes from a certain protocol or create a blockchain from scratch. Instead, you simply need to follow a standard template on the blockchain, for example, on the Waves or Ethereum platform, which will enable you to create your own tokens. 

The use of smart contracts has made it possible to create your own tokens. A smart contract is a programmable computer code that is self-executing and does not require any third party to function.

DeFi tokens are built on and often named for their native and unique blockchain networks. Some of the most popular DeFi coins at the moment include Ankr, Chainlink, Aave, Uniswap, Compound, and Maker.

What are altcoins?

Altcoins essentially refers to any type of coin that is not Bitcoin. Altcoins often have some characteristics similar to Bitcoin while being different as well. For instance, some altcoins use a different consensus mechanism to validate transactions or produce blocks. 

Most of the altcoins out there today are a variant of Bitcoin, built using the original, open-source protocol of Bitcoin, yet with changes being made to the underlying code. This creates a completely new coin with a different range of features. 

Some examples of altcoins that fall into this category, i.e. are variants of the Bitcoin code, including Auroracoin, Dogecoin, Litecoin, Peercoin, and Namecoin. 

However, not all altcoins have been derived from the open-source protocol that Bitcoin uses. Instead, their own protocol and blockchain have been created, which supports the native currency. 

Examples of coins that fall into this category include Counterparty, Waves, NEO, Bitshares, Omni, Ripple, and Ethereum. 

One thing that is common across all alternative coins is that they each have their own independent blockchain, and this is where transactions relating to their native coins happen.

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Author: Heath Donald

Founder of No Names Digital, Heath is a dynamic and innovative business strategist with the talent, experience and drive to recognise good ideas across a range of industries and transform them into market-busting offerings. With 25 years’ experience, Heath has a deep understanding of what it takes for a digital-age business to thrive, and a rare ability to energise the teams propelling those businesses into the future. Heath’s passion for creating and developing new ventures unlocks potential and yields high returns.