Reply To: Ways to raise capital for real estate investing…..

[Lance Thompson]

The difference between a cryptocurrency and a token……The difference between Bitcoin and Ethereum……..Taken from an article off of the Indian Express, a news website over in India……This article came out on Tuesday, June 8th, 2021………….

What’s interesting for our purposes is that in addition to being a cryptocurrency, Ethereum is also a token. What’s a token? Well, the easiest metaphor, frankly, is to just think about a token at a Chuck E. Cheese. It’s a kind of money that’s redeemable for goods and services within a very specific environment. At Chuck E. Cheese, obviously, the tokens let you play videogames and pinball and Skee-Ball and whatever else.

Ethereum world, the currency (ETH) lets you pay a network of computers to run various applications that are built on top of it. One of the biggest applications running on top of the Ethereum network is the aforementioned exchange Uniswap, where you can trade different coins for each other. Each time you place a trade, you have to pay a “gas fee” (denominated in ETH) to the network of computers that process the transaction. So Uniswap, in this analogy, is like one of the games in the arcade.

There’s something important that happens when you move from being a currency to being a token, which is that the necessity of pure belief starts to fade. If someone hands you $100 worth of Chuck E. Cheese tokens, you might be annoyed, and you might find them to be completely useless. But you probably accept the premise that if you drive to a Chuck E. Cheese, then you’ll be able to use them to play the games. You might not want to. You might not have any use for it. But you know that you can. You don’t have to subscribe to any Chuck E. Cheese ideology.

Bitcoin to have value, you kind of just have to accept that it has value. Either you believe or you don’t. With a token, there’s less faith involved. If you want to use an app that is built on top of Ethereum, then you have to use it. If someone sends you Ethereum, you know you’ll be able to use it within the overall environment. You might be skeptical of the whole thing and think it’s all speculative games. But as with the Chuck E. Cheese token, it works and it’s necessary if you want to participate in that world.