Is UMI a Coin or a Token? What’s the Difference?

Since we’ve launched the network, we’ve received some questions like: “What is UMI exactly — a coin or a token?”. Moreover, our users have erroneously said UMI was a token while some of them even believed coin and token were the same thing, just synonyms. But it’s not like that. 

“Coin” and “token” are two completely different concepts used by the crypto community, including big aggregators like Coinmarketcap, to categorize digital assets. The truth is there’s a thin dividing line between them and it mixes things up. 

Even though our Whitepaper says UMI is a fully-featured digital coin, today we would like to review this aspect in more detail, answer all questions and sort out all confusion and misunderstanding. To straighten things out, we simply need to understand the difference between a coin and a token which is exactly what we’re going to do now.

What is a coin?

Coin (a piece of metal used as money, in English) is a digital coin used as a fully-featured cryptocurrency. You can understand it’s a coin based on its various technical features. No worries — we’re not going to dig deep and mess around with the code. 

Instead, let’s have a look at three main features allowing you to easily distinguish between coins and tokens: 

  1. All coins have their own blockchains. All coins, with no exceptions, operate their own blockchains: they have their own chains of blocks, unique transactions and networks. Coins include all cryptocurrencies designed from scratch and forks that originated from other coins. Some users feel confused: if forks are based on other cryptocurrencies, how can they have their own blockchain? Let’s clear it out: when a fork occurs in a cryptocurrency network, its blockchain is divided into two parts one of which becomes a separate, independent blockchain for the new cryptocurrency. For instance, Bitcoin fork resulted in Bitcoin Cash. Bitcoin blockchain was divided into two branches — one of them still belongs to Bitcoin while the second branch became the blockchain for Bitcoin Cash. Two completely independent blockchains emerged. Similarly, to create a blockchain and a new coin one can use the source code of any cryptocurrency. Having one’s own blockchain means you can design new features and implement various technical solutions that other cryptocurrencies don’t have. It allows the coin to be independent and follow its own path. 
  2. Coins are fully-featured and multi-functional “digital money”. Each coin is the main currency unit in a cryptocurrency network that can be used for various purposes, including payment for any goods and services. Coin capabilities are virtually unlimited — they can be used anywhere. Technically and on a practical level, they can substitute ruble, dollar and other currencies that are basically fiat coins rather than digital ones. For instance, BTC — the world’s first-ever cryptocurrency — has been widely used as means of payment in various sectors. You can use it to pay at numerous cafés, restaurants and stores all around the world, buy or rent a car, buy airline tickets or real estate, buy software, bet in a casino, etc. Your possibilities are endless. 
  3. Most coins can be “mined”. Since cryptocurrencies use their own blockchain, users can usually support network operations and generate new coins. Most fully-featured cryptocurrencies can be mined, forged or staked — depending on the algorithm they use. In the UMI network, for instance, new coins are mined via Smart Contract Staking that uses the Proof-of-Authority algorithm. Please, note that in actual fact some coins cannot be mined as some developers simply don’t implement this feature.

Most popular coins:

  • BTC (Bitcoin); 
  • ETH (Ethereum);
  • LTC (Litecoin);
  • TRX (TRON);
  • BCH (Bitcoin Cash);
  • ADA (Cardano). 
Post image

Bitcoin (BTC) is currently the most popular coin with the highest capitalization. Source. 

What is a token?

Token (voucher that can be exchanged for goods or services, in English) is the internal currency unit existing in the blockchain of a particular cryptocurrency and used for a specific purpose. Tokens are not fully-featured independent cryptocurrencies.

Unlike coins, tokens don’t have the features described above:

  1. Tokens don’t have their own blockchains. All tokens use blockchains of other cryptocurrencies which they totally depend on. How’s that even possible? In fact, it’s not unusual. Some cryptocurrency platforms offer all users an opportunity to create Smart Contracts and launch their own digital assets. These are tokens. The most outstanding example is the Ethereum platform. Its blockchain is used as the basis for creating all kinds of tokens. The platform’s main currency unit — ETH — is a coin, a fully-featured cryptocurrency. However, all other “cryptocurrencies” based on the Ethereum blockchain — for instance, on the popular ERC-20 standard — are categorized as tokens. Overall, 90 % of all tokens use Ethereum, with the rest of them based on NEM, EOS, Minter and other blockchains. Tokens depend on their parent cryptocurrencies and have to “follow the rules”. Yet again, all ERC-20-based tokens are tied to the Ethereum network. They use the same address format, and all transfers involve Ethereum transactions since they happen within the Ethereum blockchain. Whenever Ethereum experiences blockchain issues, these are carried over to all Ethereum-based tokens. Some think that tokens “prey” on other blockchains since they increase the load on the network though they do not always have an actual value. For obvious reasons, designing a token is a lot easier than designing a coin. At the Ethereum platform, it only takes a few minutes. 
  2. Token is not “digital money”, it’s “digital chips”. Whereas coins are multi-functional “digital money”, tokens are more like digital chips designed to fulfil a certain function. They can be used to buy a service or confirm ownership rights, etc. The easiest and most straightforward comparison is the subway token used to fulfil a particular function which is open the turnstile. In the blockchain world, tokens can be used for various purposes, for instance, in the gaming industry. Gaming tokens can be used to buy various accessories within the game, improve your skill levels, make deals with other players, etc. However, you cannot just walk into a café or a store and say you’d like to buy groceries or some products for a gaming token — no one will sell you anything since this token only has value in a particular game. It’s like trying to go to the movies and handing a circus ticket to the ticket agent. In some cases though tokens are added to the crypto exchange — and can be exchanged for any other cryptocurrency or fiat money. Still, they don’t become coins just because they are added to the exchange. Please, note that the scope of application is also very wide for tokens. For instance, some tokens are backed by fiat money and tied to its exchange rate. They are known as stablecoins, and their main purpose is substituting fiat money, such as dollars, in cryptocurrency trading. 
  3. Tokens cannot be “mined”. Since tokens use another cryptocurrency’s blockchain, they don’t have their own network that could be supported for a reward. Neither PoW nor PoS nor PoA offer an opportunity to mine new tokens the usual way which is why in most cases all tokens are issued simultaneously. Nonetheless, an additional issue is sometimes a possibility thanks to smart contract features, but this process is nothing like mining, forging or staking. Tokens are often issued by centralized platforms that formulate rules of token issue and operation. One of the most frequent reasons for token issue is the launch of ICO in order to raise funds in exchange for tokens. It’s too bad many ICO’s turn out to be scams or failures, and tokens bought for coins or fiat money become useless. 

Most popular tokens:

  • USDT (Tether); 
  • LINK (Chainlink);
  • MANA (Decentraland);
  • MKR (Maker);
  • CRO ( Coin). 
Post image

There are far fewer popular tokens than coins. Source.

The conclusion is: UMI is a coin, a fully-featured cryptocurrency.

We believe that coins play a far greater role in the cryptocurrency industry than tokens. They have a bigger potential and are completely independent projects. Based on the above technical features, you can rest assured UMI is a fully-featured coin rather than a token. 

  • UMI has a unique source code and its own blockchain, like any other fully-featured cryptocurrency. This is a blockchain platform developed from scratch. It can create and execute smart contracts and operates using master nodes and the unique Proof-of-Authority model. 
  • UMI is decentralized. It does not “prey” on other cryptocurrencies, it’s independent, it does not follow someone else’s rules, all transactions run within its own network. Moreover, UMI can issue tokens of its own. 
  • UMI is a multi-functional cryptocurrency, fully-featured “digital money” that can be mined via staking with earnings of up to 40 % a month. Neither does it require powerful equipment or harm the environment
  • UMI can be used to pay for goods and services, but it can also be used in various business sectors. It’s not just theory. It’s all about practice. As a reminder, ISP Club designs and issues plastic cards that can be used to make payments in UMI at any store with a teller workstation, almost anywhere in the world. Moreover, these cards allow you to exchange UMI for fiat money and make a withdrawal at ATM’s at any time. 

Here we are starting a new digital era, and anyone willing to do so can jump onto our train right now. Join us. UMI is your sure step toward the future. Let’s take this step together! 

Sincerely yours, UMI Team!