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Users in the crypto universe often use the terms “token” and “coin” interchangeably. However, they refer to distinct concepts with specific characteristics and uses.

Coin

Coins are digital assets that operate on their own blockchain. This means they function and are managed on a dedicated blockchain, and they are considered native assets to their respective blockchains.

Their primary purpose is to facilitate all transactions carried out on their blockchain, essentially acting as a means of exchange. Thus, a coin is a unit of value mainly used to secure the network of the blockchain on which it is based.

Today, there are more than a thousand coins, including :

Token

Unlike coins, tokens are created on existing blockchains such as Ethereum. They can fulfill a wide range of functions and applications beyond a primary role as a means of exchange.

Tokens can be used to :

  • Represent assets : such as real estate or artwork. This allows these assets to be tokenized to facilitate their exchange and management on the blockchain.
  • Offer utilities : Some tokens provide access to specific features in decentralized applications (dApps). For example, they can be used to activate premium features.
  • Voting systems : where each token grants a vote.
  • Game tokens : used in Web3 games or gaming platforms.

🔎 Learn more : Token : What is it ?

The use of smart contracts facilitates the creation of tokens. They allow creators to develop their own tokens on an existing blockchain network.

Ethereum is the most popular platform for token creation, mainly due to its well-established standards. The most common standards for creating tokens on Ethereum are ERC-20 for fungible tokens and ERC-721 for non-fungible tokens (NFTs). Other blockchains, like Binance Smart Chain, use their own standards, such as BEP-20.

There is no shortage of tokens, with their number now in the thousands. Among them are :

Key Takeaways

The main difference between a coin and a token lies in their fundamental nature. Indeed, a coin operates on its own blockchain, while a token exists on a pre-existing blockchain.