Cryptocurrency coins and cryptocurrency tokens are often used interchangeably to refer to the same thing, but they’re actually different items in the overall crypto ecosystem. In simple terms, cryptocurrency coins are cryptocurrencies that have their own blockchains. Cryptocurrency tokens, on the other hand, are cryptocurrencies that do not have their own blockchains, and hence they’re built, coded, and released on another layer one blockchain.
It’s important to understand the distinction and to have a more broken down understanding of the cryptocurrency market, especially knowing the different types of cryptocurrencies and what segments they’re used in.
Altogether, cryptocurrencies are divided into two categories – coins, which are supported by their own blockchains; and tokens, which are created as part of a platform built on an existing blockchain. This article will explain the fundamental difference between cryptocurrency coins and tokens.
What Is A Crypto Coin?
A cryptocurrency coin is the native asset of a blockchain network that can be traded, utilized as a medium of exchange, and used as a store of value. A crypto coin is issued directly by the blockchain protocol, which is why it’s called the blockchain’s native cryptocurrency.
If you look at a list of the top 10 cryptocurrencies by trading volume on Phemex for instance, you’ll see that a majority of the largest cryptos by market cap and popularity are cryptocurrency coins. This is because cryptocurrencies that have their own blockchains receive the greatest attention because of their technological features and applications.
In summary, a crypto coin is an asset that’s native to its own blockchain. Examples of crypto coins include Bitcoin, Litecoin, and Ether – since all of these coins exist, operate, and function on their own blockchains. That is what makes them a coin and not a token.
If you’re an investor, you’ll most likely want to have a selection of cryptocurrency coins in your portfolio – especially if you’re betting and bullish on future blockchain adoption, thus a strong future demand for that blockchain’s native cryptocurrency.
Some of the top crypto coins in 2022 include Bitcoin (BTC/USDT), Ethereum (ETH/USDT), BNB (BNB/USDT), Dogecoin (DOGE/USDT), Cardano (ADA/USDT), Solana (SOL/USDT), Tron (TRON/USDT), Avalanche (AVAX/USDT), and Litecoin (LTC/USDT).
What Is A Crypto Token?
A crypto token is a cryptocurrency that’s created or programmed on an existing blockchain. For example, a Web3 project has come up with a great product and service, and they want a cryptocurrency that their users can use to use the service, hence they go to Ethereum and decide to build a token that’s Ethereum-compatible. Cryptocurrency tokens that are compatible or usable on Ethereum are known as ERC-20 tokens.
Unfortunately, the terminology is confusing because these crypto tokens (similar to crypto coins) are blockchain-based assets (like coins) that have value and can be sent and received. But, you should remember that the technical reason why they’re not called “coins” is because instead of running on their own blockchain, tokens are issued on an existing blockchain-network such as Ethereum, Solana, and BNB.
Similar to crypto coins, crypto tokens can be great investment choices because of their niche applications (Web3, GameFi, metaverse, infrastructure, identity, data, cloud, AI, etc) and often have the potential to increase more rapidly than established cryptocurrency coins (mainly because of reputation and hype, but also because token’s can bring more fresh innovations to the market).
Some of the top crypto tokens in 2022 for investors and traders to look out for include Polygon (MATIC/USDT), Chainlink (LINK/USDT), Filecoin (FIL/USDT), Sandbox (SAND/USDT), Chiliz (CHZ/USDT), Aave (AAVE/USDT), and Decentraland (MANA/USDT).
Crypto Token Use Cases
- DeFi (Uniswap, Maker, Synthetix)
- Exchange Tokens (PancakeSwap, Curve, THORChain)
- Web3 (Theta Network, Arweave, The Graph)
- Interoperability (Quant Network)
- DEX (1inch, SushiSwap, Serum)
- Lending (Aave, Nexo, Compound)
- Derivatives (Lido DAO, Rocket Pool)
- Data Management
- File Storage
- Gaming (Axie Infinity, PLA, Gala)
What Do Coins & Tokens Do?
Cryptocurrency coins and tokens have many applications when it comes to the crypto-economy, decentralized finance, and the metaverse. Coins are primarily used for money, payments, adn transactions. Tokens, on the other hand, have opened up many additional avenues that will increase the execution and practical use of decentralized applications (DApps), Web3, and smart contracts. Tokens are what are primarily used to interact with these decentralized applications and to facilitate transactions.
In addition, many crypto exchanges and organizations have started creating their own platform tokens. They do this with a specific business model in mind to encourage user interactions like trading, voting on key business decisions, making technical changes to the platform, and as a form of reward distribution to the network participants. This is why tokens come in the form of reward tokens, currency tokens, utility tokens, security tokens, and asset tokens.
Therefore, tokens offer a different level of functionality distinct from that of coins, which are used for making or receiving payments on a blockchain.
Are Stablecoins Coins Or Tokens?
As mentioned above, the cryptocurrency market is broad and inclusive, to the point where digital assets called stablecoins have entered the arena. Stablecoins, since they’re called stablecoins, are best to be called coins. This is because of their use cases being primary for money exchange and not necessarily for actions such as governance, voting, funding protocols, etc. Although they technically don’t fit the above definitions, stablecoins are separate cryptocurrencies that should fall under the category of cryptocurrency coins.
The top stablecoins on the market are Tether (USDT), USD Coin (USDC), Dai, Frax, and Pax Dollar.
Crypto Coin vs Token: What’s The Difference?
The main difference between coins and tokens is whether the asset is native to its own blockchain. However, there are other differences such as what coins and tokens are used for. Like their name implies, crypto coins are primarily used for payments, as currencies, and thus are better for transactions. On the other hand, crypto tokens have more use cases such as for governance, voting, data funding, smart contracts, metaverse money, and specific DeFi protocols.
|Difference Between Coin And Token|
|Program||Native blockchain-asset||Built on an existing blockchain|
|Function||Usage as currency, payments, transactions||Usage as currency, governance, protocol, data, smart contracts, metaverse, DeFi|
Can A Token Become A Coin?
In theory, a token can become a coin if it were to develop and launch a blockchain, and then re-deploy that asset on the native blockchain. However, this is not necessarily practical or necessary for a specific project. It’s very costly to do blockchain development, and hence it’s much easier to simply launch on an existing blockchain, given the market is already very crowded with competitive layer 1s and 2s (if scalability is needed).
Coin vs Token: Which Is Better To Invest In Or HODL?
Cryptocurrency coins and tokens will likely see positive future returns due to increased demand for blockchains in the future, increase DApp usage, DeFi, as well as for the development of Web3 as a viable alternative to Web2. Investors would be wise to craft portfolios that cover the coins that they feel will have the most impact towards the next iteration of finance and the internet, whether that be Bitcoin (digital gold), Ethereum for DApps, or even smaller more niche tokens for the metaverse, Web3, and specific DeFi use cases such as lending.
Cryptocurrency coins are what led to first cryptocurrency investment boom. This is because they allow for a more convenient peer-to-peer payment system outside of using cash. At the same time, they have attracted many investors worldwide due to their prospects of delivering high-returns and more user-friendly. However, cryptocurrencies are more than just forms of digital cash or investment options – they’re increasingly important for the blockchain’s continuation, as Bitcoin and Ether are needed to keep the network running. Demand for blockchain usage will lead to more demand for cryptocurrency coins and tokens.
Tokens on the other hand can be used by people for many more reasons. They can be used for trading, holding as a store of value, as a form of currency, but also for the huge decentralized application and DeFi industries. In the end, both these forms of crypto will surely see lots of expansion in the coming years.