Is ZNN a token or a coin?

Viewed 173

Are ZNN and QSR tokens or coins? What is the difference between a token and a coin?

1 Answers

For some people, the terms "coin" and "token" are used interchangeably. For others, the term "token" denotes a second class asset.

I think it is more useful to think in terms of a network's native currency vs other supported assets.

A network's native currency is assigned utility directly by the network's protocol and usually plays a critical role in its routine operations. For example, bitcoin (BTC) is the native currency of the Bitcoin network. Miners create new satoshis (1 bitcoin = 100 million satoshis) when they create new blocks and users incentivize miners to confirm their transactions by attaching fees. Ether (ETH) is the native currency of the Ethereum network and in addition to transaction fees for validators, it is used for their proof-of-stake consensus model and gas fees. When making a distinction between coins and tokens, coins generally refer to assets which are the native currencies of their respective protocols.

ZNN and QSR are the native currencies of the Zenon Network and their utility is directy assigned by our protocol. Both ZNN and QSR are needed to operate network infrastructure such Pillars and Sentinels. ZNN can be delegated to a Pillar or staked. ZNN can also be used to create ZTS tokens (more on that below). QSR can be fused for Plasma which allows for feeless transactions. These use cases are all directly built into the protocol. So it would be appropriate to call ZNN and QSR coins.

Tokens usually refer to other assets available on a protocol whose utility does not directly come from the protocol itself. These assets could represent social ownership of data (e.g NFTs), claims on real world assets (e.g fiat collaterized stablecoins), currencies for other protocols (e.g LINK which powers the Chainlink oracle network on Ethereum), and much more.

Different protocols have varying levels of support which allow anyone to create tokens. On Bitcoin, this is an area of active research and experimentation with Ordinals being the most notable. On Ethereum, tokens are implemented through smart contracts on the EVM. Because of the flexible nature of the EVM, the community has created standard contract interfaces such as ERC-20 for fungible tokens and ERC-721 for NFTs. Because of the prevalence of Ethereum, many people refer to these standards by default when using the term "token".

While there are standard implementations of these interfaces, these contracts can also implement custom behavior. This custom behavior may be essential to the utility of the token, but could also be unexpected and malicious, e.g. the ability to transfer another user's tokens.

Because tokens (1) have no direct protocol utility, (2) can be issued by anyone, (3) and can have unexpected or malicious behavior, many people view them as second class assets.

Unlike ECR-20 tokens on the EVM, Zenon Network provides direct protocol level support for creating tokens. ZNN and QSR are built upon the protocol level Zenon Token Standard (ZTS) and users can create additional ZTS tokens at the cost of 1 ZNN. One safety feature of the Zenon Protocol is that no other ZTS token is allowed to be called ZNN or QSR. The Zenon Token Standard treats all ZTS tokens the same, which means there are no unexpected or malicious features. While ZTS tokens are less flexible than ERC-20 tokens, because of their consistent protocol defined behavior, they are more performant and safer.

It is likely that in the future, Zenon ecosystem will support other token standards, either at the base protocol layer or on higher layers.