30 May 2023

The difference between a native token and a token

The native token can be compared to a national currency. Only crypto has no geographical borders - just networks and blockchains.
Native token vs token PNG

In Short

This article explains the relationship between networks, blockchains, and tokens. If you do not already know, understanding the difference is crucial on your path to becoming a crypto expert.
We will start by explaining the terms blockhain and network, and the combination of the two, which we title blockchain network. This is necessary because each blockchain network has one native token. Examples of blockchain networks
blockchain - network png
Relationship between blockchain and networkThe blockchain is the network’s source of historical truth. For instance: You can think of the Bitcoin blockchain as the Bitcoin Network’s continuously updated database of who owns how many bitcoin.So what is the native token of a blockchain network?The native token is used for:1) Paying transaction fees for your transaction to be included in the blockchain2) Staking in a proof-of-stake secured blockchain network3) Issuing mining or staking rewards in the blockchain network4) As the value component in a transaction on the blockchainThe first three are exclusive for native tokens, while 4) applies to all tokens. We have listed four blockchain networks, and each's native token in the table below.
blockchain - network - native token png
NOTE! People mix network, blockchain, and token naming big time!!! When your friend says he owns Ethereum, he actually: Owns Ether, the native token of the Ethereum Network. And the existence of his Ether, can be confirmed on the Ethereum blockchain. Bitcoin, Ether, Ada, Litecoin, etc. are native tokens – then what does the term ‘token’ apply to?A ‘simple’ blockchain like bitcoin – all it does is log transactions of the native token bitcoin. A ‘smart’ blockchain like Ethereum, however – allows for the creation of other tokens.• In addition to transactions involving the native token Ether, Ether allows for the creation of- and transacting with other tokens through smart contracts• For instance, Shiba Inu is a token created by a smart contract on the Ethereum blockchain• In jargon, since it is created by a contract on the blockchain, Shiba Inu is referred to as a token, while Ether which doesn’t need its own contract is referred to as a native token So… A native token is the token used to pay for transaction fees and issue mining or staking rewards in a blockchain network. A token is created through a smart contract on a blockchain network. To transfer the token, you would still need the native token to pay for transaction fees.
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