Have you ever wondered why some cryptocurrencies are referred to as ‘coins‘ and some are called ‘tokens‘?
The CryptoVerse is full of technical jargon and technical terms. Unfortunately, many of these words are confusing when technology gets constantly refined and improved, making the definition change all the time to suit the latest developmental changes.
There was only Bitcoin (BTC) and other altcoins in the beginning. And these are referred to as coins. However, things changed in 2015; when the Ethereum (ETH) project swung into action, we started to see thousands of tokens like Golem (GNT) and Shiba Inu (SHIB) that take advantage of the ETH blockchain by storing themselves onto it.
Understanding the main differences between a coin and a token is essential to the crypto investor, especially when comparing it against other coins/tokens. Therefore, this article will explain their fundamental differences in a simple table format.
What are the KEY DIFFERENCES between a Coin and a Token?
The table below sums up all the notable differences.
|Its a product||Its a service|
|It has its blockchain||They do not have their blockchains. Instead, it uses other coin’s blockchain, e.g. using the Ethereum network (ERC-20 tokens)|
|Do not rely on smart contracts||Rely on smart contracts|
|Represents a medium of exchange||Represents an asset|
|It cannot use directly with decentralized applications (dApps)||Can be used directly with decentralized applications (dApps)|
|It cannot be staked and no interest earned||Can be staked to earn interest|
|Can be mined||It cannot be mined|
What are the similarities between a Coin and a Token?
- Both can be used as a store of value, e.g., as a virtual currency for money transfers (send & receive).
- They do not have to be physically or manually moved when they are spent. It is a digital spend. BNB is a token for Binance to facilitate all their transactions in the exchange by charging BNB transactional fees.
- Both are considered to be digital assets.
Can a Token become a Coin in the future?
Yes, this is possible. First, however, the token has to migrate from its existing blockchain (e.g. using Ethereum) into its blockchain. This process is referred to as token migration.
Successful migrations projects include Tron (TRX) and Zilliqa (ZIL). Both coins used to be residing inside the Ethereum blockchain as tokens.
List of popular Crypto Coins
- Bitcoin (BTC)
- Litecoin (LTC)
- Ethereum (ETH)
- Solana (SOL)
- Dogecoin (DOGE)
- Cardano (ADA)
List of popular Crypto Tokens
- Brave (BAT)
- Binance (BNB)
- Shiba Inu (SHIB)
- Loopring (LRC)
- Civic (CVC)
- UniSwap (UNI)
- Chainlink (LINK)
- Wrapped Bitcoin (WBTC)
- Tether (USDT)
- USD Coin (USDC)
- Polygon (MATIC)
- Golem (GNT)
What are some of the different types of Tokens?
Tokens can be categorized accordingly to their use cases, such as reward tokens, currency tokens, utility tokens, security tokens, and asset tokens.