We’ll be looking at a topic that often confuses people who are new to cryptocurrency – Tokens vs Coins.

What is a Token?

It is any digital asset created on the blockchain. It is usually issued or minted on another blockchain, often existing alongside several others that belong to different projects.

Anyone can easily create a crypto token by writing a bunch of computer codes or even using automated tools.

What is a Coin?

A coin is a cryptocurrency that runs on its blockchain. It is also referred to as the ‘native token’ of the blockchain and often serves as a way for projects to pay transaction fees while building out their applications on the same blockchain.

Building out a blockchain requires many human and financial resources (millions of pounds), meaning that not everyone can launch a coin. However, anyone can create a crypto token and name it anything they want (LOL).

What is the difference?

Going by the above definitions, you may already be able to tell some of the differences between crypto coins vs tokens. But we’ll highlight them in the list below so that you’ll have a clearer understanding:

• Coins have a native blockchain, while tokens do not.
• It costs less to make a token than the money spent because the former stays on the existing blockchain.
• Tokens can eventually become coins when a project has its own blockchain and moves its tokens to a new blockchain as money. Successful migration cases include Binance Coin (BNB), Tron (TRX), Zilliqa (ZIL) which existed as tokens on the Ethereum blockchain.

Coins primarily serve as a payment cryptocurrency, while tokens on the other hand can serve a variety of use cases. For instance, have the following token classifications:

• Security tokens: Security tokens are digital assets that represent traditional “security”. For example, some security tokens represent a company’s shares or bonds to raise money for investors.
• Inheritance-backed tokens: These are tokens that represent real estate assets, for example, a piece of land or gold types with tokens stored in a warehouse. Such issuance allows these assets to be sold without a specific transfer of basic assets.
• Invisible Tokens (NFTs): NFT tokens serve primarily as collections. Users can create NFTs for almost anything, including art, baseball, visual wealth, event tickets, etc.
• Stablecoins: These crypto tokens represent digital forms of fiat money. They are usually labeled 1: 1 against less money, and as a result, they are always used for the same price. Popular examples include USD Coin (USDC), Tether (USDT), and Gemini Dollar (GUSD).

Coins

Going by the differences between token vs coins, the following cryptocurrencies qualify as coins:

• Bitcoin (BTC)
• Ether (ETH)
• Litecoin (LTC)
• Monero (XMR)
• Tron (TRX)
• Binance Coin (BNB)
• Cardano (ADA)
• Zilliqa (ZIL)

We will use Ether (ETH) to further illustrate how crypto tokens differ from crypto coins.

Ether (ETH) and ERC-20

Ether (ETH) is a coin and a ‘native token’ of the Ethereum blockchain. It is the second-largest cryptocurrency in terms of market price and is widely used by developers and other network participants to pay money on the network.

However, the Ethereum blockchain version allows developers to create their own tokens over the network using a standard called ERC-20. Therefore, any token created in Ethereum is appropriately called a ‘token’ and not a ‘coin’. The title of the coin appropriately belongs to Ether (ETH), the city currency for the Ethereum network.

A good example of an ERC-20 token on Ethereum is the Basic Attention Token (BAT). BAT is used by Brave Browser developers as a user interface, allowing users to earn money to view ads and advertisers to pay for ad posts in the browser.

Other ERC-20 tokens on Ethereum include Chainlink (LINK), Tether (USDT), Wrapped Bitcoin (WBTC), Dai (DAI), Compound (COMP), and many more.

Final thoughts

An easy way to tell the difference between cryptocurrency vs tokens is to find out if cryptocurrency has a blockchain or not. If it has a blockchain, then it’s a bullet, and if it doesn’t, then it’s a sign.

Knowing this puts you in a better position to use words correctly, either by writing or talking to people about cryptocurrency assets.