When you are new to the cryptocurrency world, it is hard to comprehend all the new terminologies and what they mean. The coins and tokens from different types of cryptocurrencies will not only confuse you at first, but it can take much of your time trying to understand how they work.
By now, you may have heard about app coins and protocol tokens. We will take you through the main differences that distinguish them. Thus, this article will be invaluable for newbies, but even experienced gurus can take a point or two that will help them become better at what they do.
What Are App Coins?
App coins make operations within a certain app possible. They can be said to be the in-house currency. Surprisingly, this concept existed before blockchain technology was brought into use. Now, let us look at the dApps that are used in cryptocurrency and how they make use of app coins to operate. They do not need to run under a main cryptocurrency like Ethereum to function.
They usually create their own coins to work within their environment. There are many benefits to this. Being unique protects them from external infiltration and they can make their own decision. So, when the people involved in the app provide services, they are paid using the app coins and they can convert this into currency if they wish. One benefit that they enjoy is that there are minimal barriers if any to entry because no one can claim ownership of Ethereum or the other main cryptocurrencies.
What Are Protocol Tokens?
When you protocol coins with experts at Nakitcoins, you will start to get a clear picture of what they are. The insights that we are about to share are even more helpful for beginners.
Before we check what protocol tokens are, let us look at the meaning of a protocol itself. These are rules that govern and guide a cryptoeconomic framework. This could be Ethereum, Bitcoin, or any other cryptocurrency. The rules give a detailed guide on how the cryptocurrency will operate in its blockchain.
With such insights, it is easy to understand what the protocol token is. This is the main native coin that is used in the cryptoeconomic space. Simply put, each cryptocurrency should have one blockchain and one protocol token. For instance, Ethereum has Ether as the protocol token that is used.
Unlike app coins, the protocol coins have a diversified use as they operate outside of the environment. A good example is when a person buys goods or services from a seller using a protocol token like Ether. Since they are given value in relation to real money, they can be bought or sold for cash. It is no wonder why people buy and sell protocol tokens as a form of investment since their value goes up and down.
Now that we have seen the main differences between app coins and protocol tokens, the confusion has come to an end. Every beginner will find this information very helpful because it creates a basic understanding of the two.