Cryptocurrency is now a fairly common term. Most of us must have read about different kinds of cryptocurrencies and how they are traded. Some of us would have even invested in the lucrative but speculative digital asset class. While one must research the risks involved and gains expected before making such an investment, it’s equally important to understand the technical terms. We sometimes inadvertently use cryptocurrencies and crypto tokens interchangeably. Though similar, these two have fundamental differences and it’s important to not confuse them. Both are digital assets. But cryptocurrencies have their own blockchain whereas crypto tokens are built on an existing blockchain.
What is a cryptocurrency?
A cryptocurrency is a blockchain’s ‘native currency’ — like Bitcoin or Ether — and is issued directly by the blockchain protocol on which it runs. Many times, cryptocurrencies are used to pay transaction fees or incentivise users to keep the cryptocurrency’s network secure. Investors put their money into cryptocurrency as these coins typically serve as a medium of exchange to buy goods and services, or as a store of value to be exchanged for fiat currency — like Indian Rupee or US Dollar — at a later date in the hope of getting good returns or at least the same value as invested. Bitcoin price in India stood at Rs. 28.2 lakhs and Ethereum price in India stood at Rs. 1.84 lakh as of 9:30am IST on August 4.