Is Ether a coin, a token, or a digital currency?

Highlights

• The terms ‘cryptocurrency’, ‘coin’, ‘token’, and ‘crypto asset’ have no standard definition, which makes categorisation of cryptos difficult
• Bitcoin was developed as a digital and decentralised currency, and today, it has been adopted by a few nations as money
• Ether has limited uses – one, within the Ethereum network for making payments, and two, as a speculative asset listed on exchanges

The cryptocurrency world can be both enticing and confusing. There are reports that some people have earned a fortune by opportunistic buying and selling of cryptos. The list of ‘Bitcoin millionaires’ is long and the term itself is quite alluring. The current year, however, has come as a necessary reminder that cryptos, be it the biggest Bitcoin or smaller altcoins, are risky and their value can drop sharply.

This year has reignited discussions around whether Bitcoin and its peers like Ether (ETH) and Dogecoin should be called currencies or whether it is better to call them tokens, if not speculative assets. Bitcoin was launched so that blockchain technology could be used in global financial transactions; however, the progress in this regard has been dismal. Bitcoin and later cryptos are used more as investment assets by people than as media for payment.

Against this backdrop, should ETH be considered a currency, a coin, a token, or something else? Let us explore this here.

Ether – Ethereum’s ‘cryptocurrency’

Ethereum.org – the website supported by Ethereum Foundation, the founder of the blockchain network – maintains that Ether is a cryptocurrency. The problem is that there is a lack of consensus on the actual meaning of the term ‘cryptocurrency’, with many, including the Australia Taxation Office, using the term ‘crypto assets’. But this debate aside, the question is what actually is ETH and is it competing directly with Bitcoin?

Etheris the ‘money’ for Ethereum’s blockchain services. If a developer wants to use the network to deploy a new decentralised app or to create a new nonfungible token, the payment must be made using ETH. By this measure, ETH is Ethereum’s internal mode of payment and store of value for people using the services.

Data provided by CoinMarketCap.com

Currency, coin, or token?

Ethereum.org states that other cryptos created using the network are tokens. These are the so-called ERC-20 tokens and include popular names like Shiba Inu (SHIB). SHIB is considered a ‘meme token’, and some other categories are gaming, metaverse, and stablecoin. Ethereum itself, however, does not categorise Ether among tokens. It specifically maintains that the ETH crypto is money within Ethereum and by this measure, it competes with Bitcoin, which is meant to change the global payment landscape.

Bottom line

It is very hard to find a consensus on most of the aspects within the cryptocurrency world. Can Ether become a widely adopted digital currency outside of its native Ethereum network? Or will it remain a coin confined to the network? In a short explainer on Ethereum.org, ETH is considered not the same as tokens built on Ethereum’s blockchain; instead, it is labelled a cryptocurrency.

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