Token vs. Coin - Simple Explanation
So you’ve stumbled upon the world of crypto and think you’ve got it all figured out: you’ve got some crypto, downloaded a crypto wallet, and are waiting to become crypto rich since you know the future of cryptocurrency is bright.
But then you notice people using all these different cryptocurrency terms you can’t understand. Especially “token” and “coin”. Aren’t they all just cryptocurrencies?
While some people do use token and coin interchangeably, there technically is a difference between tokens and coins. In this article, we’ll break down that token vs. coin difference for you in a way that’s easy to understand.
So to understand the crypto token vs. coin difference, let’s first define what a coin is.
A crypto coin is a crypto asset (crypto asset refers to all kinds of cryptos) that has its own blockchain, as opposed to running on another crypto asset’s blockchain. You could also call a crypto coin a cryptocurrency or a “native token” (confusing, we know) - the underlying idea is that the asset has its own blockchain.
The best known example of a coin in the blockchain space is Bitcoin, the original crypto coin/cryptocurrency. Other examples include Ethereum, Litecoin, and Monero.
And so if a coin (otherwise known as a cryptocurrency or native token), has its own blockchain, a token is the opposite: it runs on another blockchain.
The best known example of this is the ERC20 token, which is any token that uses the Ethereum blockchain.
Example: Is Ethereum a Coin or Token?
Let’s test our knowledge by using an example. Since we know that coins have their own blockchain and tokens don’t, is Ethereum a coin or token?
Since Ethereum has its own blockchain, it’s a coin. This also means that if you have a wallet that supports Ethereum, all assets that use the Ethereum blockchain, such as ERC20 tokens, are compatible with your wallet. Though depending on the wallet, not all Ethereum-based assets might be displayed.
Token vs. Coin: The Difference
And so in sum, the simple explanation of the difference between coin vs. token is that a coin has its own blockchain, while a token doesn’t.
Another thing to note is that coins usually are used for 1 thing (payments), while tokens have various use cases, which can include payments but also other things. For instance, when comparing a coin or cryptocurrency vs. utility token, utility tokens are used to access a product or service.
For example, Basic Attention Token (BAT) is used in the Brave web browser ecosystem. Advertisers pay publishers with audiences in BAT, audience members receive BAT for viewing advertisers’ ads, and audience members can use that BAT to donate to publishers or keep the BAT for themselves.
Other uses for tokens include:
- Security tokens - like securities from the old financial system (OldFi), these represent shares of a company but with all the benefits of blockchain
- Asset tokens - tokens that are backed by real world assets like gold or real estate
- Stablecoins - tokens that represent more stable - at least relative to cryptocurrencies like Bitcoin - currencies, such as the US Dollar or Euro
- Non-fungible tokens (NFTs) - NFTs represent things that are unique like art, baseball cards, and in-game items (think “virtual real estate” or unique virtual pets)
Token vs. coin: simple enough right? Coins have their own blockchain and tokens don’t.
Looking to learn more crypto terminology? Our cryptocurrency terms article has you covered.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.