Key Takeaways:
Coins
- A crypto coin is a form of digital currency that’s often native to its blockchain; it stores value and acts as a medium of exchange.
- Coins can be mined through Proof of Work (PoW) or earned through Proof of Stake (PoS).
- Examples include Bitcoin (BTC), Ether (ETH), and Cardano (ADA).
Tokens
- A crypto token is built for a decentralised project on an existing blockchain (usually Ethereum, the most popular blockchain for decentralised projects to build upon).
- A token represents an asset or offers holders certain platform-specific features.
- Tokens offer functions, including utility, security, and governance.
- Examples include Cronos (CRO); Very, Very Simple Finance (VVS); and Uniswap (UNI).
Token vs Coin: What Is the Difference?
While many people use the phrases ‘crypto coin’, ‘crypto token’, and ‘cryptocurrency’ interchangeably, they’re not the same thing. Though coins and tokens use distributed ledger technology (also known as blockchain technology), there are some significant differences between a coin and a token.
The TLDR is: Crypto coins are a form of digital currency that are often native to a blockchain, with the main purpose of storing value and working as a medium of exchange.
Crypto tokens are digital assets that are built on top of an existing blockchain (using smart contracts) and can serve a wide variety of functions, from representing a physical object to granting access to platform-specific services and features.
What Is a Crypto Coin?
Crypto coins are native to their own blockchain. The Bitcoin blockchain coin is BTC. The Ethereum blockchain has ETH. And the Litecoin blockchain uses LTC. These crypto coins are primarily designed to store value and work as a medium of exchange, similar to traditional currencies. This is why crypto coins are also referred to as cryptocurrencies.
One of the other unique things about coins is the way they come into being. Generally, crypto coins are either mined using a Proof of Work (PoW) consensus mechanism or earned via a Proof of Stake (PoS) mechanism.
For more on the differences between PoW and PoS, read Proof of Work vs Proof of Stake.
What Are Coins Used for?
When Bitcoin was created, it was envisioned as a replacement for traditional fiat currencies. Along with other crypto coins, it was designed to work in the same ways as paper money and metal coins, meaning it can be used for many of the things normally used with US dollars or euros, including:
- Storing value
- Exchanging for other currencies
- Paying for goods and services
- Transferring to others
In addition to these traditional uses, some crypto coins can also take advantage of smart contract technology to offer additional features. For example, DASH is an altcoin that acts as a cryptocurrency but also gives holders the ability to vote in a decentralised autonomous organisation (DAO).
Popular Crypto Coins
- Bitcoin (BTC) was launched in early 2009 by the mysterious ‘Satoshi Nakamoto’ and is the first and most well-known crypto coin in the world. Its head start has allowed it to become the most valuable cryptocurrency.
- Ether (ETH) is one of the most popular crypto coins around and more than just a cryptocurrency. Thanks to the creation and implementation of smart contracts, Ethereum has become home to thousands of blockchain projects and non-fungible tokens (NFTs). In some ways, it’s the backbone of the blockchain revolution.
- Cardano (ADA) is an open-source and decentralised blockchain platform that was one of the first to run on a PoS consensus, gaining a rep as a green crypto coin. Cardano was founded in 2015 by Ethereum co-founder Charles Hoskinson and facilitates peer-to-peer (P2P) transactions with its coin ADA.
What Are Tokens?
Like crypto coins, crypto tokens are designed using blockchain technology; however, crypto tokens aren’t native to a blockchain. Instead, they’re built on top of it, often utilising smart contracts to fulfil a variety of purposes.
While crypto coins mimic traditional currencies, crypto tokens are more like assets or even deeds. A crypto token can represent a share of ownership in a DAO, a digital product or NFT, or even a physical object. Crypto tokens can be bought, sold, and traded like coins, but they aren’t used as a medium of exchange.
To use a real-world example, crypto tokens are more like coupons or vouchers, while crypto coins are like dollars and cents.
There are numerous types of crypto tokens:
Some governance tokens offer holders voting rights in a DAO.
Utility tokens may provide access to certain services or products developed by the token issuer.
Security tokens act like traditional securities and are even treated the same by many governmental agencies.
What Are Tokens Used For?
Most crypto tokens are designed to be used within a blockchain project or decentralised app (dapp). Unlike crypto coins, tokens aren’t mined; they are created and distributed by the project developer. Once tokens are in the hands of purchasers, they can be used in countless ways.
Popular Crypto Tokens
- Filecoin (FIL) and Arweave (AR) give users the ability to spend their utility tokens for the privilege of storing data on their decentralised network, pushing the concept of cloud storage to its full potential.
- Axie Infinity, one of the best-known play-to-earn (P2E) on the market, features a utility token called Smooth Love Potions (SLP). By earning or purchasing SLP, players can perform exclusive in-game tasks.
- Cronos (CRO) is the utility token for the Crypto.com ecosystem. CRO can be used to pay fees on the platform or staked for various benefits, and it allows token holders to trade crypto tokens for fiat at a reduced price.
What About Stablecoins? Are They Coins or Tokens?
Stablecoins are cryptocurrencies tied to specific assets. They are a bit of a misnomer, as most of them are actually ERC-20 tokens (i.e., they operate on the Ethereum blockchain through a smart contract). So why are they called stablecoins? The name lends itself to their primary function of being a medium of exchange.
Take USD Coin (USDC), for example. It is a smart-contract-based stablecoin (i.e., it doesn’t have its own chain and is an ERC-20 token). It is backed by US dollars, held by the company that issues the token, to maintain the value of every USDC at US$1.
Conclusion
The question of whether to buy coins or tokens is largely dependent upon a holder’s goals. Both can be purchased in the Crypto.com App or on the Crypto.com Exchange with low fees and best execution prices. Browse our data and descriptions of thousands of coins and tokens on Crypto.com Price.
Due Diligence and Do Your Own Research
All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction.
Although the term ‘stablecoin’ is commonly used, there is no guarantee that the asset will maintain a stable value in relation to the value of the reference asset when traded on secondary markets or that the reserve of assets, if there is one, will be adequate to satisfy all redemptions.
Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.
