1.04 Cryptocurrency coins vs tokens: what is the difference?
This lesson explains the differences between crypto coins and tokens.
In your research to understand the crypto sphere, you may have encountered articles where the terms ‘coins’ and ‘tokens’ are being used interchangeably. It is common to think that coins and tokens are the same. However, these terms are not the same and they have a fundamental difference.
If you are a newbie to crypto, you might not know the difference between coins and tokens. But, it is important to understand the terms properly before learning further concepts about cryptocurrencies. We are here with another lesson to help you understand coins, tokens, and everything in between.
This lesson explains the differences between crypto coins and tokens.
- What is a cryptocurrency coin?
- What is a cryptocurrency token?
- Differences between coins and tokens
What is a cryptocurrency coin?
A cryptocurrency coin is built on an independent blockchain network. It is an asset native to its very own blockchain. It can be used as a store of value, or a medium of exchange.
The largest cryptocurrency in the world, Bitcoin is the best example of a cryptocurrency coin. It exists on its own independent ledger i.e. Bitcoin blockchain as a unit of value. Other leading coins like Ether and Cardano also exist on their own blockchain platforms.
Examples of cryptocurrency coins - Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Cardano (ADA), Ripple (XRP), Bitcoin Cash (BCH), etc.
What is a cryptocurrency token?
A crypto token is a digital asset built on an existing blockchain platform. It isn’t native to any blockchain network.
Crypto-related organizations or projects develop crypto tokens on top of existing blockchains. Most of the crypto tokens are issued or minted on the Ethereum blockchain network. They are called ERC-20 tokens.
Unlike coins, it is very simple to create tokens. By writing a bunch of computer codes or using automated tools, you can create a token. You can even give it a name based on your preference.
Examples of crypto tokens - ERC20 tokens like Tether (USDT), Chainlink (LINK), USD Coin (USDC), Wrapped Bitcoin (WBTC), etc.
Differences between crypto coins and crypto tokens
We’ve looked at the basic fundamental difference between crypto coins and tokens. Let’s understand their differences in detail.
- Cryptocurrency coins are based on their own blockchain network. But, tokens are built on existing blockchains.
- A crypto coin can be used for payments and as a store of value but tokens have multiple use cases like security tokens, asset-backed tokens, non-fungible tokens (NFTs), tokenized money (Stablecoins), etc.
- It is less expensive to create a token when compared to a coin.
- Tokens can be created easily on an existing blockchain by using automated tools and templates while creating a coin requires a lot of work as it involves creating a completely new blockchain network.
One interesting thing about tokens is, they can become coins if the project develops its own blockchain. When tokens are migrated to the new blockchain network, they become coins. Binance Coin (BNB) and Tron (TRX) are examples of this case. Previously they existed as tokens on the Ethereum blockchain, however, they now have their own blockchain i.e. Binance Smart Chain and Tron.
The easiest way to differentiate the coins and tokens is to look if they have their own blockchain network or not. We hope that this lesson keeps you in a better position to use the terms ‘coins’ and ‘tokens’ correctly the next time.
This material does not constitute investment advice, nor is it an offer or solicitation to purchase any cryptocurrency assets.
This material is for general informational and educational purposes only and, to that extent, makes no warranty as to, nor should it be construed as such, regarding the reliability, accuracy, completeness or correctness of the materials or opinions contained herein.
Certain statements in this educational material may relate to future expectations that are based on our current views and assumptions and involve uncertainties that could cause actual results, performance or events to differ from those statements.
BB Trade Estonia OU and its representatives and those working directly or indirectly with BB Trade Estonia OU do not accept any liability arising from this article.
Please note that investing in cryptocurrency assets carries risks in addition to the opportunities described above.
2.04 Understanding market capitalization
This lesson centers on understanding cryptocurrency market capitalization.
2.03 Common crypto trading terms
This lesson is a compilation of the most commonly used crypto trading terms.
2.01 Why to invest in cryptocurrencies
This lesson explains why cryptocurrencies might be a good asset to include in your investment portfolio.
2.07 Measuring market depth and liquidity
This lesson explains market depth, market liquidity, and volatility.
2.08 Three major types of trade orders you need to know
This lesson explains three major types of trade orders and how they work.
2.09 Fundamental and technical analysis for crypto trading
This lesson focuses on explaining how fundamental and technical analysis will help you assess cryptocurrencies.
2.10 Bull markets vs Bear markets
This lesson explains bull and bear markets and what you can do in each case.
1.08 What is Bitcoin?
In this lesson, we dig deep into the roots of the crypto and blockchain tree - Bitcoin.
1.09 How Bitcoin price is defined
This lesson helps you understand what determines the price of Bitcoin.
1.10 Sending and receiving Bitcoin
In this lesson, we explain how to send and receive Bitcoins.
1.11 What is Bitcoin halving?
This lesson takes you through the concept of Bitcoin halving.
1.12 Understanding Bitcoin nodes
This lesson explains what a Bitcoin node is and the different types of nodes.
1.13 Can Bitcoin network be hacked?
In this lesson, we discuss why it is nearly impossible to hack the Bitcoin blockchain.
1.14 The fundamentals of altcoins
In this lesson, you learn about the fundamentals of altcoins.
1.20 What is Ethereum and how does it work?
This lesson helps you decode Ethereum thoroughly.
1.19 Bitcoin mining difficulty & pre-mined coins
This lesson covers two concepts - Bitcoin mining difficulty and pre-mined coins.
1.18 How do mining pools work?
This lesson explains the function of mining pools in detail.
1.07 Best practices to keep your crypto safe
This lesson provides you with valuable tips and tricks to keep your cryptocurrencies safe.
1.17 What is mining in blockchain?
This lesson will explain the basics of the cryptocurrency mining process.
1.06 Understanding crypto wallet terms
In this lesson, we take a deep dive into crypto wallet terms like public and private keys, wallet address, and ...
Zonda is now zondacrypto!
As the exchange continues to evolve and grow, we're thrilled to announce that we're rebranding and changing our name to better reflect our vision and values. We're still the same team you know and trust, but with a fresh new name that captures our spirit of innovation and customer-centric approach.
Some things may look a bit different but don’t worry - all operations remain the same and your login details work as usual.
Stay tuned for more updates and exciting changes as we embark on this new chapter together. Thank you for your continued support and loyalty!