In the complex world of cryptocurrencies and blockchain platforms, the distinction between tokens and the native coin is fundamental. To illustrate this difference, let's take a close look at the iconic case of Ethereum (ETH) and ERC-20 tokens.
1. The Native Coin: Ethereum (ETH)
Ethereum, one of the most influential blockchains, has its own native coin called Ether (ETH). Ether is not just a means of transaction on the platform; it is the fuel that powers the execution of smart contracts and transactions on the network. As a native coin, ETH is the central pivot around which the entire Ethereum ecosystem revolves.
2. Tokens: The Example of ERC-20 on Ethereum
Tokens, on the other hand, are digital assets issued on an existing blockchain using smart contracts. On Ethereum, tokens compliant with the ERC-20 standard are the most common. They can represent a variety of assets, from cryptocurrency to unique digital assets. Unlike the native coin, ERC-20 tokens are built on top of the Ethereum blockchain, using the infrastructure provided by Ether.
3. Main Distinctions:
Main Function: The native coin, like Ether, serves as fuel and a unit of value for transactions on the platform. Tokens, on the other hand, have diverse functions, from representing alternative cryptocurrencies to materializing specific digital assets.
Issuance: The native coin is usually issued upon blockchain launch, while tokens can be created at any time through the issuance of smart contracts.
Usage: Native coins are often used to pay transaction fees and participate in network consensus. Tokens, on the other hand, can have a varied use depending on their design, from simple representation of value to governance rights in a specific ecosystem.
Practical Example: Ether (ETH) and ERC-20 Tokens
Ether (ETH) is essential to Ethereum for the execution of smart contracts and transactions. On the other hand, ERC-20 tokens, such as the famous Tether (USDT) or BAT (Basic Attention Token), are created in accordance with the ERC-20 standard but are not intrinsically necessary for the functioning of Ethereum.
Conclusion :
The distinction between native coins and tokens is crucial to understanding how blockchain ecosystems work. While native coins are the fundamental pillars, tokens add a layer of flexibility, enabling the creation of a multitude of diverse digital assets on a single platform.
