The main difference between a crypto coin and a crypto token is that coins have their own blockchain, while tokens are built on an existing blockchain. Coins are designed to be used as currency, while tokens can represent an interest in an asset or facilitate transactions on a blockchain.
Blockchain Dependency
- Coin: A coin operates on its own native blockchain. For example, Bitcoin operates on the Bitcoin blockchain, Ether on the Ethereum blockchain, and ADA on the Cardano blockchain.
- Token: A token is created on an existing blockchain, often for a specific purpose or application. For instance, most tokens are built on the Ethereum blockchain using its ERC-20 standard (e.g., Chainlink, Uniswap).
Purpose and Use
- Coin: Coins are generally used as a form of currency or store of value. They function as digital money and are intended to transfer value in transactions. Examples include Bitcoin (BTC) and Litecoin (LTC).
- Token: Tokens are often used to represent assets or utility in a specific project or application. Tokens can grant access to specific services, represent assets, be used within decentralized applications (DApps), or even represent ownership (as in non-fungible tokens, NFTs).
Functionality
- Coin: Coins often function as standalone digital money and can be transferred, spent, or held like traditional currencies. Some coins, like Ether, also support smart contract functionality within their native blockchains.
- Token: Tokens are versatile and can represent more than just currency—they can be loyalty points, voting rights, in-game items, or anything else. Some tokens are even backed by physical assets or commodities.
Transaction Fees
- Coin: Coins often have transaction fees that go to miners or validators within their own blockchain network.
- Token: Tokens rely on the fees and validators of the blockchain they are built on. For example, ERC-20 tokens incur Ethereum gas fees for transactions.
Examples
- Coins: Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB) when used on its own Binance Chain.
- Tokens: Tether (USDT), Chainlink (LINK), Uniswap (UNI), and most NFTs.
