Cryptocurrency uses the term “coin” the way many people use the word “Kleenex” or “dollars”. In both cases, the words can be used as proper nouns. For example, Kleenex is a brand name and originally a proper noun rather than a generic word that means “facial tissue”. The word “dollar” is a proper noun in the specific context of the currency (the U.S. Dollar) but used colloquially as a common noun.
Crypto “coins” are roughly the same. Instead of being called “crypto dollars”, we get crypto coins instead. But why did that term become the accepted jargon?
A Brief History Of Crypto Coins
Cryptocurrency has its origins in smartcards, at least in terms of proto-crypto and pre-Web 3.0. There are reports of smartcard use as early as the 1980s as a way to fight gas station thefts. And while smartcards aren’t crypto coins, the idea of a type of payment that could be used between two people as a form of electronic money is definitely an important part of the history of crypto.
In the 1990s, PayPal furthered the concept of an electronic cash system that was not tied to a specific traditional financial institution.
But the association of coins with crypto was still a way off. It wouldn’t be until after the turn of the century circa 2008-2009 when a person or collective calling themselves Satoshi Nakamoto published a whitepaper titled, Bitcoin: A Peer-to-Peer Electronic Cash System that we entered into the land of coins, crypto, and online trading of virtual currencies.
Bitcoin Gets There First
Bitcoin’s functionality as described in the whitepaper by Satoshi Nakamoto includes the excerpt below as reported by Investopedia. When you buy, sell, or trade Bitcoin, “…the network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”
Bitcoin is generally accepted as the first crypto coin to operate in this specific way for the specific purpose of a decentralized transaction that the currency became famous for.
It’s All In The Name
You may have a hard time finding a definitive source for when “coin” became an official term, and it may be necessary to accept that crypto “coins” became known as such because of the slang that rose from the creation of other virtual currencies that were not Bitcoin.
When “altcoins” started making their mark in the crypto space, Ethereum was poised to become the main challenger to the Bitcoin throne. Altcoins are basically any non-Bitcoin digital currency, so it’s likely that the nickname was responsible for a larger trend toward labelling a virtual currency as a coin rather than a “digital dollar” or similar nomenclature.
Types of Coins
There are literally thousands of coins or virtual currencies. A small handful of the most influential includes:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Polkadot (DOT)
- Avalanche (AVAX)
- Solana (SOL)
- Dogecoin (DOGE)
- Shiba INU (SHIB)
The Difference Between Crypto Coins and Crypto Tokens
A crypto coin is created from the ground up, so to speak. Each coin has its own blockchain and the first, Bitcoin, essentially exists with a purpose–to be a decentralized currency that has a specific policies which govern it. Ethereum also exists for specific purposes such as catering to those who need blockchain-based options for online gaming, social media, virtual worlds, NFT art projects, etc.
Crypto tokens, on the other hand, may have specific functionality that varies depending on the token. They can be utility-based, meaning they may serve as a means of admission to a collective or project. They may be used to identify memberships in virtual and real-world events, and some may be used to pay fees or rewards depending on the token.
A token can be used or traded as an asset and depending on the platform you may be able to stake a token in order to earn rewards on it. Tokens, unlike coins, don’t have their own blockchains, but rather reside in the blockchain.
Are There Physical Crypto Coins?
Yes and no. There was an attempt to mint a physical replica of Bitcoins that was shut down by the federal government in 2013. The Casascius Bitcoins project was infamous for running afoul of American laws forbidding the establishment of a hard currency that would compete against the U.S. Dollar, at least according to one source.
Casascius Bitcoins were intended to be circulated as money but the conferred value was not philosophical in nature, but instead tied to the private keys hidden in the coin.
The keys, not the coin, provide the actual value, but this nuance was lost on the United States Treasury, which according to at least one source sent the creator of these physical crypto coins a warning saying essentially that any operation of this type requires the business owner to register with the federal government as a “money transmitter.”
Except for purely ornamental representations of a crypto coin, anyone who attempts a similar project is likely to get the attention of the federal government at some point, unless they actually do register as a money transmitter.
Joe Wallace has covered real estate and financial topics, including crypto and NFTs since 1995. His work has appeared on Veteran.com, The Pentagon Channel, ABC and many print and online publications. Joe is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.