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Coin, Token, Security & Utility Tokens… What exactly is the difference?

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Anyone who wants to invest in the market around Bitcoin, Ethereum and Co. should know the basic terms of the crypto scene in detail. What is the difference between a coin and a token? What exactly is a utility token? How do I secure my investment in stable tokens? And what kind of security do security tokens actually offer? We explain and give simple answers.

Coins and tokens – what exactly is the difference?

Often these two terms are fundamentally misused. Yet the distinction is very simple:

Coins use their own blockchain, while tokens use another existing blockchain!

One second, that was too complicated for you? No problem, we’ll explain the background.    In this context, blockchains can be described as protocols that determine how individual network nodes communicate with each other. Bitcoin, for example, uses its own protocol and can therefore be classified as a coin. US Tether, on the other hand, uses the Ethereum blockchain (among others), i.e. it uses an existing network for its transactions. US Tether can therefore be described as a token.

What is an ICO?

An Initial Token Offering (ICO) is comparable to a stock exchange listing/Initial Public Offering (IPO). In the course of the ICO, the issuer publicly raises capital for his project for the first time. In contrast to the classic IPO, however, ICOs are largely unregulated and therefore offer little security for its investors. In exchange for the capital provided, investors receive a part of the tokens of the cryptocurrency of the ICO, which in turn can be traded on a crypto exchange after initial listing. 

Ethereum and the rise and fall of ICOs

The Ethereum platform and the ERC20 token based on it have contributed significantly to the hype around Initial Coin Offerings (ICO) in 2017 and 2018. In these two years alone, ICOs with a value of more than 20 billion US dollars were implemented.

The ICO of the web browser Brave was able to collect 35 million US dollars in only 30 seconds

While some of the projects still exist today, many of the realised ICOs have failed. The investors behind them have had to forfeit their investment completely or for the most part. But are investments in new coins fundamentally a bad idea? No, as our next article explains: ICOs are dead, long live the STO!

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