If you're new to the world of cryptocurrency, you'll no doubt have found that there's a whole lot of jargon and technical terminology to try and wrap your head around. Two terms that can be the source of much confusion are "coin" and "token", especially as they're often used to refer to the same things.
But technically speaking, there is one key differentiation between the two.
The one key difference between coins and tokens is that coins are the native currency of a particular crypto blockchain or network, while tokens are additional coins that are hosted on another blockchain.
For example, ETH is the native coin of the Ethereum network, while SHIB (Shiba Inu) is a token that was created on the Ethereum network.
In general terms, a cryptocurrency coin is just that – an encrypted digital currency meant to be used as a form of payment. A coin is a unit of value that operates on its own blockchain, independently of any other platform. It can be used to store value and pay for services, in much the same way that you would use physical money.
Bitcoin (BTC) is easily the best-known cryptocurrency coin around the world, but it’s far from the only coin available. In fact, there are thousands of crypto coins in existence. You may see many of these other coins referred to as altcoins, an abbreviation of alternative coins, simply because they offer an alternative to Bitcoin.
Some altcoins are a fork of Bitcoin and were developed using Bitcoin’s open-source protocol. Examples include Litecoin (LTC) and Dogecoin (DOGE).
However, there’s also a long list of other altcoins that haven’t been derived from the Bitcoin protocol and have instead created their own blockchain and protocol. Some well-known examples include Ethereum (ETH), Ripple (XRP) and Cardano (ADA).
Tokens are used to represent digital assets that are fungible and tradeable, including everything from commodities to voting rights. However, rather than operating on their own blockchain, tokens are hosted by another platform, such as Ethereum.
While tokens are also a medium of exchange, they offer functionality above and beyond that of coins. Tokens give their holders the ability to take part in some kind of activity – for example, if you want to bet on the outcome of future events through decentralised prediction market Augur, you’ll need to use REP, the Augur platform’s native cryptocurrency token. Tokens can also offer value to buyers, for example through buybacks.
Tokens are usually created and distributed to the general public through Initial Coin Offerings (ICOs), which are a form of crowdfunding. Some of the best-known crypto tokens include EOS (EOS), Tron (TRX) and OMG Network (OMG), with Ethereum being the most popular platform for token development.
However, there are also plenty of other platforms which tokens can be built upon, including Omni, NEO, Waves and Qtum.
Coins are standalone cryptocurrencies based on their own blockchain. Tokens are built and hosted on existing blockchains.
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