The Good Tech Companies - Educational Byte: Using Coins and Tokens in Different Crypto Networks

Episode Date: August 31, 2024

This story was originally published on HackerNoon at: https://hackernoon.com/educational-byte-using-coins-and-tokens-in-different-crypto-networks. It isn’t uncommon anymore to handle funds across several crypto platforms, using different coins. That’s why all crypto users need to know the differences! Check more stories related to web3 at: https://hackernoon.com/c/web3. You can also check exclusive content about #cryptocurrency-investment, #cryptocurrency-network, #tokens-vs-coins, #crypto-bridges, #distributed-ledger-technology, #obyte, #crypto-networks, #good-company, and more. This story was written by: @obyte. Learn more about this writer by checking @obyte's about page, and for more stories, please visit hackernoon.com. Using the same token in one network may be cheaper and faster than in another, so learning how to choose the most convenient option doesn’t hurt. Let’s use an example here with the stablecoin USD Coin (USDC) Originally, this was a token that worked on ETH only (the network, not the ETH coin), but now it is available in at least 16 more chains, including Avalanche, Celo, Flow, Polygon, and Obyte.

This audio is presented by Hacker Noon, where anyone can learn anything about any technology. Educational Byte. Using coins and tokens in different crypto networks, by Obite. Sometimes, transferring cryptocurrency funds or using certain applications cold have a steep learning curve. That's partly because there aren't only one or three cryptocurrencies around these days, but thousands of them. Besides, it isn't uncommon anymore to handle funds across several crypto platforms, using different coins. That's why all crypto users need to know the difference between networks, tokens, and coins before sending or locking money into the wrong address. Another solid reason to try and use different platforms is

for the involved fees. Using the same token in one network may be cheaper and faster than in another, so learning how to choose the most convenient option doesn't hurt. Let's check how that works. Networks, ledgers, or chains. Maybe the first thing that comes to your mind when trading cryptocurrencies is that you're using X currency, namely BTC, ETH, GBYTE, etc. And that's it, but actually, that's not it. There's a layer beneath what you can see. The infrastructure in which that coin, token, or contract inhabit and whose rules that transaction can't but obey. That's the network, distributed ledger, or chain involved. A crypto network, distributed ledger, or chain refers to a decentralized system that securely records

transactions across multiple computers and has its own set of rules and features. The terms aren't equivalent in all contexts, but for final users, they all describe the same underlying technology. The fundamental layer, or the system, rules and fees included, you're using to transact, and that's different from the coin you selected. And let's use an example here with the stablecoin USD coin, USDC. Originally, this was a token that worked on Ethereum only, the network, not the ethcoin, but now it's available in at least 16 more chains, including Avalanche, Celo, Flow, Polygon, and Obite. Each one of these networks has its own version of USDC with its own address type. This occurs because USDC aims to be interoperable instead of working on just one network,

and ledgers don't natively connect with each other. Besides, trading USDC on Ethereum is different from trading USDC on Obite, for instance. Same token, but different networks, which implies different rules and costs ethereum average transaction fee for eth and all tokens is currently at around three dollars four on the other hand a transaction on obite often costs zero dollars oh one therefore in that case trading usdc on obite would be cheaper than on eth. Because again, same token, but different ledgers. Tokens vs. Native Coins The main distinction between these two types of coins is simple enough.

Native coins, like ETH or GBYTE, are necessary for the respective network's Ethereum or Obite operation, while tokens are not. Native coins depend on the network and the network depends on them too, while for tokens, like the aforementioned USDC, the dependence is one-sided. They depend on the network, but not the other way around. Usability is another factor. So, for instance, on Ethereum and similar networks, sending a native coin to a contract immediately triggers contract execution. However, to achieve the same effect with tokens, users first have to approve the contract to spend their tokens, then call the

contract. That's two steps, a bit complicated. On the contrary, in Obite, sending both native coins and tokens to an autonomous agent, ah, triggers its execution. Always one step in the same flow for both native coins and tokens. This is an exception among networks and not the rule, though. Other than the mentioned differences, native coins and tokens can be identical things. Coins built with cryptography within a distributed network. However, how a certain asset is perceived in the crypto world could be important for its value and trading methods. Tokens, like stablecoins, are considered the same across different networks because they represent the same underlying value or asset, no matter where they are issued. For instance,

a stablecoin like USDC on Ethereum and USDC on Tron both represent the same thing. A token backed by the US dollar with the same price and purpose. These tokens are created following specific standards, which makes them function similarly across different networks, even though they exist in separate environments. Native coins, like ETH on Ethereum or BTC on Bitcoin, are deeply tied to the irrespective chains, and their functionality is specific to that network. Its value also comes from that network and its features also comes from that network and its features, and not from an external as set or platform. When these native coins are used on

a different network, they become wrapped versions, like wrapped ETH or wrapped BTC. This means the original coin is locked in a contract, and a tokenized version IS created on another network. Wrapped tokens act as placeholders, but they aren't the actual native asset, they're representations of them. That's why they're treated differently and traded separately on exchanges. Non-native tokens can also be wrapped to port them into different networks, but they're often still treated and traded as the same thing, as we mentioned before. Cross-chain bridges. These are handy tools that allow users to transfer assets and data between different crypto networks. They work by locking assets on one chain and minting equivalent assets

on another, enabling users to interact with multiple ecosystems seamlessly. This way you could, for instance, exchange USDC on the Ethereum network for the same amount on the Obite network. We have the counter- counter stake bridge for that. In any case, if you're using a token, remember to pick the network wisely. Fees and features will change accordingly. If you're using a native coin, you may be already on their network or explicitly using a wrapped version of it and its sticker may give you a good clue, WBTC, for example. There are numerous multi-chain wallets, such as Metamask, that will allow you to handle a diverse portfolio.

N featured vector image by FreePic N Thank you for listening to this Hackernoon story, read by Artificial Intelligence. Visit hackernoon.com to read, write, learn and publish.