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The Difference Between Cryptocurrency Coins and Tokens


    Traders and crypto enthusiasts often need clarification regarding the differences and similarities between crypto coins and tokens. Some use these terms interchangeably, even though they have distinctive characteristics. It’s common in the crypto industry for terms and definitions to be misunderstood, but we should still do what we can to ensure that everyone is on the same page. 

    Whether you invest in crypto or not, it’s important for you to know the differences between coins and tokens in addition to understanding their separate functionalities. To resolve any confusion regarding these two types of digital currencies, we’ll explain their main differences and key attributes. At the end of this article, you can easily distinguish between coins and tokens, pushing you further towards becoming an expert in the crypto space! It’s time to dive in and discover what a crypto coin is, what a crypto token is, and what uses both these digital assets have!

    Coins vs Tokens Summary

    Short on time? Here is a summary of the main characteristics of crypto coins and tokens!

    👉 Crypto Coins

    ● Operates on their own blockchain

    ● Have the sole purpose of making payments 

    ● Ideal for long-term investments 

    👉 Crypto Tokens

    ● Operate on an existing coin’s blockchain

    ● Have other purposes besides making payments

    ● Are often used to power dApps (decentralised applications) 

    Cryptocurrency Coins and Tokens

    How to Buy Crypto Coins and Tokens

    The good news is, in most cases, buying both crypto coins and tokens requires the same process. If, after reading this article, you plan on buying coins or tokens, then we’ll let you know the easiest way to do so! 

    To begin with, you’ll want to decide which coins or tokens you’re interested in trading. Further along in this article, we’ve listed examples of each type of cryptocurrency, and you can choose to research more about these options or head to a crypto marketplace for a wider selection. 

    Once you’ve decided on coins or tokens to trade, we suggest signing up for a crypto platform to be connected with a broker that can guide you on your journey. Crypto brokers are simply the intermediary between the market and traders. Their role is to make the entire process simple and beginner-friendly so first-time traders are not overwhelmed by the complexity of trading. 

    Since there are so many brokers to choose from, you can try the services of a crypto-linking website, designed to connect suitable ones with traders using an automated system. This way, you won’t have to waste your time sorting through loads of different brokers and risk signing up for one that is not suited to your trading needs and goals. After being connected to a broker through a crypto platform, you can start buying and trading whichever coins and tokens you’re interested in! 

    What Is a Crypto Coin?

    A crypto coin is a cryptocurrency that runs on its own blockchain and is distributed through a process known as mining. Crypto coins are mined through either a Proof of Work (PoW) mechanism or a Proof of Stake (PoS) mechanism. Bitcoin was the first ever crypto coin to exist and was launched in 2009 by an individual or group under the pseudonym Satoshi Nakamoto.

    Before we move on to the uses of crypto coins, we need to briefly mention altcoins (alternative coins). Altcoins are all cryptocurrencies that are not Bitcoin and, according to some members of the crypto community, Ethereum. This is due to most crypto being forked from either of these major cryptocurrencies.

    The definition of altcoins causes a grey area in the distinction between coins and tokens. This is because not all altcoins have their own blockchain, whilst both coins and tokens can sometimes be considered as altcoins. This can often add confusion when discussing coins and tokens, which is why some approaches include altcoins as a completely separate category. However, as long as you know what altcoins are, then this can hopefully help you understand how they often sit on the (already blurred) line between crypto coins and tokens. 

    What Are Crypto Coins Used For? 

    The primary purpose of crypto coins is to act as a form of currency, similar to fiat money such as Dollars, Euros, and Pounds. Coins can typically be used to store value, exchange for other currencies, and purchase goods or services. As the cryptocurrency industry expands, more companies worldwide are accepting crypto coins as a valid form of payment. Additionally, countries are taking steps towards the regulation of crypto, and this has led to this digital asset being considered as legal tender in some areas of the world, such as El Salvador and the Central African Republic..

    Examples of Crypto Coins

    ● Bitcoin

    ● Ethereum 

    ● Cardano

    ● XRP

    ● Solana

    ● Avalanche

    ● Polkadot

    Crypto Coin

    What Is a Crypto Token?

    A crypto token is a cryptocurrency that is created on and runs on an existing blockchain instead of having its own. Although some tokens are used for payments, similar to crypto coins, most tokens have other specific use cases. Tokens can be separated into different categories depending on their main functions. Whilst the majority of tokens have specific use cases, some are simply created to exist and have value, such as memecoins.  

    What Are Crypto Tokens Used For? 

    As we’ve already mentioned, there are several different types of crypto tokens, each with its own uses. Here is a quick rundown of the main types of tokens that you may encounter as a crypto trader:

    ● Utility Tokens allow token holders to access certain products and services and are typically distributed through initial coin offerings (ICOs). These tokens are often referred to as “digital coupons” and are not designed to be a real-world medium of exchange. Popular examples of utility tokens include Tamadoge (TAMA) and ApeCoin (APA). 

    ● Governance Tokens allow token holders to vote on a blockchain project's direction, features, or operations. These tokens were designed to decentralise decision-making and give more individuals an incentive to participate in a project. One example of a popular governance token is Uniswap (UNI). 

    ● Security Tokens are similar to traditional investments such as stocks and bonds, only they are digital rather than physical. These tokens represent ownership rights and are created using tokenization. Blockchain Capital (BCap) is a famous example of a security token.

    ● Stable Coins have a value that is pegged to another asset, such as a currency like the Euro. These tokens are designed to be less volatile compared to traditional coins such as Bitcoin, making them a better option for transactions. The most well-known stablecoin is Tether (USDT), a token that is pegged to the US Dollar at a 1:1 ratio.

    ● Exchange Tokens are highly volatile tokens that are issued by exchanges and are typically created to incentivise users to sign up for their platforms. These tokens can be brought like any other type of cryptocurrency but can also be earned as a reward for completing tasks. Binance USD (BUSD) is an exchange token that was issued by the crypto exchange platform, Binance. 

    ● Non-fungible Tokens (NFTS) are cryptographic assets that are created using blockchain technology. These tokens are unique and cannot be copied or replicated, meaning that they cannot be traded the same way other crypto tokens are. NFTs exploded in popularity throughout 2020 and 2021, but sales have since declined, mainly due to the highly speculative nature of this token. The most well-known example of an NFT collection is the Bored Ape Yacht Club collection which was built on the Ethereum blockchain and released in 2021.  


    Examples of Crypto Tokens

    ● Tether

    ● Binance USD

    ● Chainlink 

    ● Filecoin

    ● Shiba Inu

    ● Tamadoge

    ● Uniswap


    Now you know the difference between crypto coins and tokens! Although, to begin with, it can be tricky to get your head around, the distinction between these two types of cryptocurrencies is actually quite simple! We also acknowledge that throwing altcoins into the mix can also cause some additional confusion, but as long as you understand that both coins and tokens can be altcoins, you should be fine! Overall, the crypto industry is filled with misconceptions and misunderstandings, but as long as we do what we can to educate each other whenever possible, soon enough, we’ll all be on the same page!

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