The Difference Between a Crypto Coin and a Token

Coins and tokens are often misunderstood and thought to be the same thing. This may come from the prospect that terminology in the crypto universe is not always as straightforward as one would wish. At the same time, most people use the phrases' crypto coin,' 'crypto token,' and 'cryptocurrency' interchangeably; they are not the same thing.

Even though coins and tokens are both units of cryptocurrency, they have different functionalities. At least to some extent.

Having a differentiation dilemma? There are two significant approaches to explain this difference.

Basic Distinction

This level of distinction is based on purpose and function. At this level, a coin is deemed a financial asset, with the sole function of making payments. Thus, a coin shows off some familiar features based on this function.

• Fungibility- This means that one unit is equal to another.

• Divisibility- It means that every unit can be divided into smaller units.

• Accessibility- This means that crypto is broadly accepted as a medium of exchange.

• Limited Supply- The total number of units is capped and constant.

• Uniformity- This means that all versions of a given denomination share the same value.

• Portability- This means that units can be transferred and exchanged.

• Durability- Units can be used several times without losing value.

On the other hand, a token has extended functionality that goes beyond money.

Alternative Distinction

This one is broader and also more inclusive. However, it makes the boundaries between coins and tokens appear fuzzier. The main distinction between the two digital assets is that coins are native to their blockchains.

As such, they were created at a given blockchain launch to be explicitly used on the said blockchain.

On the other hand, tokens are created on top of existing blockchains that already have a native currency. Let us take Bitcoin and Ether, for example. They are created on their native blockchains, Bitcoin and Ethereum, respectively.

However, there is the tricky part of differentiating coins and tokens in terms of functionality. This is because the methods of using coins and tokens often overlap, partly due to the extensive versatility of tokens.

Examples of Popular Crypto Coins

• Bitcoin (BTC)- The world's first and most well-known crypto coin. Its head start allows it to become the most valuable cryptocurrency.

• Ether (ETH) is one of the most popular crypto coins and more than just a cryptocurrency. Due to the creation and implementation of smart contracts, Ethereum comes in the mix as a home to thousands of blockchain projects and NFTs.

• Cardano (ADA)- One coin run on a PoS consensus mechanism as the start. It is gaining a rep as a green crypto coin.

Examples of Popular Crypto Tokens

• Filecoin (FIL) and Arweave (AR)

• Axie Infinity

• Cronos (CRO)

Final Thoughts

Whether to buy coins or tokens is mainly dependent upon a holder's goals. You can purchase both from exchanges such as Binance and Coinbase.

However, doing your own research before venturing into any of them is always advisable.