Token vs Coin: What’s the Difference?

Today, we’ll be looking at a topic that often confuses people who are new to cryptocurrency – token vs coin.

Sometimes people use the term “coin” to refer to what other people call “tokens”, and “token” to refer to what others call “coins”. Some people will use either name to refer to all the digital assets currently available.

However, there are very big differences between crypto coins and crypto tokens, so it’s important you know what they are!

This Token vs Coin guide will start by looking at why there is so much confusion over the two terms. It will then give some explanations of what coins and tokens really are, provide you with examples of coins and tokens, and explain how each is used. So, next time you go on Binance, Coinbase, Kraken, or KuCoin, and trade crypto, you’ll be much better informed!

By the end of this guide, you’ll also be able to recognize whether a digital asset is a token or a coin. Which is what you’re here for right?

So, let’s get started!

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Token vs Coin: What is a Coin?

The definition of a digital coin is an asset that is native to its own blockchain. Think about Bitcoin, Litecoin, or Ether. Each of these coins exists on their own blockchain.

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So, to make this a little clearer:

• Bitcoin operates and functions on the Bitcoin blockchain
• Ether operates and functions on the Ethereum blockchain
• NEO operates and functions the NEO blockchain

Transactions of digital coins can be made from one person to another. However, no physical coins move when you send and receive them. All the “coins” exist as data on a giant global database. This database (or blockchain) keeps track of all the transactions and is checked and verified by computers around the world.

Quick Tip: I should tell you this before you continue reading — if you’re not already familiar with blockchain technology, read our

I should tell you this before you continue reading — if you’re not already familiar with blockchain technology, read our Blockchain Explained guide before you read this one. It is important you understand blockchain before trying to understand the difference between a coin and a token!

Token vs Coin: How is a Coin Used?

Digital coins are generally used in the same way as a real-life coin is – as money. You can think of coins like Bitcoin, Litecoin, and Monero just like the coins in your wallet or piggy bank. Often, they don’t serve any other purpose than to be used as money. These “cash only” coins are used:

• To transfer money (you can give and receive value using them)
• As a store of value (they can be saved and later swapped for something useful)
• As a unit of account (you can price goods or services in them)

Let’s use Bitcoin as an example to make sure you understand the above statements.

• BTC can be used to pay for goods and services all over the internet and in many real-world places too.
• You can store it for a long period of time and nothing happens to it. You can then swap it for something of equal value later.
• The things that you buy can be priced in BTC too.

Other than these monetary uses, there is no other use for Bitcoin. It can’t be staked to earn more Bitcoins and it doesn’t need to be used to operate a certain application. It is used as money and that is all.

However, some digital coins (such as Ether, NEO, and DASH) have more features than just being useful as a form of money. I’ve listed these uses below:

• Ether (ETH) is used to fuel transactions on the Ethereum network. Tokens can be built on Ethereum, but Ether is still required to send a token. It funds the mining costs (it pays the computers that verify transactions on the Ethereum network).
• NEO (NEO) is staked in a wallet to earn a dividend. This dividend is known as GAS. Tokens can be built on NEO, just like they can on Ethereum. When sending a token on the NEO network, you need to pay GAS as a transaction fee, the same way that Ether is used to pay Ethereum fees.
• Finally, holding enough Dash (DASH) allows users to vote on important decisions for the Dash network. If there is an idea suggested to upgrade the DASH network, those holding enough Dash can vote to decide whether the upgrade should happen. These voting rights allow the holders of DASH to have a say in how the project evolves.

Note: Crypto dividends are coins or tokens that are awarded for holding a certain asset. A good example is NEO’s GAS. This is paid to users who leave coins in a wallet

Crypto dividends are coins or tokens that are awarded for holding a certain asset. A good example is NEO’s GAS. This is paid to users who leave coins in a wallet and stake them to secure the network. The holder is paid GAS at a set rate for doing this. It is only available on blockchains that use a Proof of Stake (PoS) consensus.

Token vs Coin: Examples of Coins

All the largest market cap digital assets are defined as coins today. However, not all coins have a large market cap.

Of course, we’re not going to list every single digital coin here. You can see the full list over at Coinmarketcap. We have included some of the more familiar ones and their tickers though. This should help with your understanding of what we mean when we use the term ‘coin’.

Bitcoin (BTC)

Bitcoin Cash (BCH)

Litecoin (LTC)

Ethereum (ETH)

Ripple (XRP)

Cardano (ADA)

Stellar (XLM)

NEO (NEO)

NEM (XEM)

Monero (XMR)

Note: The ticker is the three or four letters after each digital asset’s name. Most exchanges refer to coins and tokens by their ticker, not their full name.

Token vs Coin: What is a Token

Tokens often get called digital coins. However, this isn’t correct. There is a major difference!

Tokens are created on existing blockchains. In fact, thanks to the creation and facilitation of smart contracts, the most common blockchain token platform are Ethereum. Tokens that are built on the Ethereum platform are known as ERC-20 tokens.

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