Token vs Coin: What’s the Difference?

Crypto coins and tokens are two common but different types of crypto. Let’s explore the differences, creation processes and roles within the crypto ecosystem.

Crypto coins and tokens are two commonly used but different types of digital assets. Both can be accepted as payments through a crypto payment gateway. It is important to learn their differences in order to understand the principles of the cryptocurrency world. This guide aims to clarify the differences between coins and tokens, their creation processes, and their roles in the crypto ecosystem.

What is a crypto coin?

Crypto coins are digital assets that use their own blockchain networks. This means that they are separate from other cryptocurrencies and fiat currencies. Most crypto coins are used as money to buy and sell things and can also be held as investments, such as gold or stocks.

How are crypto coins created?

The production of cryptocurrencies follows the instructions encoded in the algorithms of their underlying blockchains. For example, Bitcoin is created using the Proof of Work (PoW) method. In contrast, Ethereum, another well-known cryptocurrency, switched from PoW to a proof-of-stake (PoS) system to issue new coins.

Examples of popular crypto coins


The cryptocurrency pioneer, BTC remains the most well-known and widely accepted digital currency known for its decentralized nature and robust security features.


ETH serves as both a medium of exchange and fuel for the execution of smart contracts and decentralized applications (dApps).

Binance Coin

BNB is used within the Binance ecosystem for reduced trading fees, participation in token sales and access to various services.


DOGE, inspired by the popular Doge meme, gained popularity for its community-oriented and lighthearted approach.

What is a Crypto Token?

Crypto tokens are assets hosted on existing blockchain networks and are usually secondary assets in their respective ecosystems. They rely on blockchains supporting smart contract functionality, enabling the creation of programmable assets with specific use cases.

Types of crypto tokens

There are four main types of tokens:

A utility token

Provide access to specific features or services within a platform.

A management token

Give holders voting rights on protocol changes and community management.

Security token

Digital representation of securities such as bonds or real estate. Equity token is another example.

A non-fungible token (NFT)

Prove ownership of digital collectibles, art, music and other unique assets on the blockchain.

How are crypto tokens created?

Tokens are usually pre-mined, allowing developers to create different economic models. Using smart contracts, developers establish the total supply at creation, while the dynamics of the circulating supply is determined by the chosen model.

Examples of popular crypto tokens

I’m tying

USDT is the largest stablecoin pegged to the value of the US dollar.


UNI serves as the management token for the Uniswap protocol, which is a decentralized exchange facilitating the exchange of tokens.


ARB functions as the management token of Arbitrum, a second-layer blockchain solution for Ethereum.

The main differences between tokens and coins

Although tokens are easier to create, they tend to have a lower trading volume. Conversely, coins tend to have larger trading volumes and greater liquidity.

Use cases and purpose

For example, Bitcoin originally emerged as an alternative to traditional fiat currencies, aiming to serve different purposes similar to paper money and coins. This includes storing value, facilitating exchange, making payments for goods and services, and enabling P2P transfers.

Crypto tokens are typically tailored for use within specific blockchain projects or dApps. They are not mined but created and distributed by project developers and can serve many purposes within their respective ecosystems.

Basic technology

Coins have their own dedicated blockchain, while tokens are built on top of existing blockchain networks. Tokens also often use multiple blockchains.

The availability of hardware and software resources affects the methods used to acquire different types of digital assets. While cryptocurrency coins can be created through mine or staking by anyone with the necessary equipment, tokens are usually controlled by their developers or creators, who have the ability to generate the entire supply at once.

Delivery and distribution

Coins, such as Bitcoin, are created through mining, where people must solve complex mathematical problems to secure the network. New coins are released gradually based on a set schedule, keeping supply under control. Tokens, on the other hand, are created by project creators and distributed through initial coin offerings (ICO) or token sales.

Stable Coins: Coins or Tokens?

Stablecoins are an important component of the cryptocurrency market. They are tied to fiat currencies like the US dollar to maintain stability. Although their name suggests they are coins, stablecoins are technically tokens. For example, Tether, originally an ERC-20 token, illustrates this distinction.

The Role of Tokens and Coins in Decentralized Finance (DeFi)

Coins and tokens play an integral role in DeFi, serving as the building blocks of innovative financial protocols and platforms. Let’s explore how these digital assets contribute to the decentralized ecosystem.

Tokens in DeFi

DeFi thrives on the ability of smart contracts to make different tokens work together. This enables easy transactions and new services in finance. Tokens power many different types of DeFi platforms, not just exchanges.

Coins in DeFi

Digital currencies such as Bitcoin and Ethereum are essential building blocks for DeFi. They provide liquidity and value to the ecosystem. DeFi platforms use these currencies to secure loans in lending agreements, create liquidity pools in decentralized exchanges, etc.

Investing in Tokens vs. Coins: What to Consider

From risk tolerance to investment objectives, understanding the nuances between investing in tokens and coins can significantly impact portfolio performance.

Liquidity and market capitalization

In general, coins tend to have higher liquidity than tokens because they often have larger trading volumes and more established markets. Higher liquidity can provide investors with greater flexibility and faster execution of trades. Coins with a higher market cap tend to have more stability and are perceived as less risky investments.

Real-world utility and use cases

Tokens are often used to raise funds for blockchain initiatives. Coins typically serve as the primary currency in a blockchain network, facilitating transactions for goods and services. However, some tokens may also offer governance voting rights or access to unique platform features.

Regulatory landscape

While some countries have embraced digital assets and introduced clear regulations to govern their use, others have taken a more cautious approach or introduced outright bans. Regulatory uncertainty remains a significant challenge for investors and industry participants, impacting factors such as market accessibility, compliance requirements and investor protection measures.

The Future of Tokens and Coins in Web3 and Beyond

As blockchain evolves, tokens and coins will become even more important in shaping the future of Web3. Tokens will power DeFi, allowing assets to be digitized and traded. Coins will remain essential as payment methods and for controlling blockchain platforms. Advances such as non-fungible tokens and interoperability between different blockchains will drive the growth of the digital economy through coins and crypto tokens.


Is Ethereum a coin or a token?

ETH is the native coin of the Ethereum blockchain, functioning similarly to Bitcoin as a medium of exchange and store of value. However, Ethereum’s design allows smart contract functionality and dApp development.

Can a token turn into a coin?

Yes, the token can evolve into a coin by migrating to its own purpose-built blockchain network.

Why use a token instead of a coin?

Tokens offer more flexibility for specific use cases and functionalities within a blockchain ecosystem. They are often used to trade and access unique features or services, while coins primarily serve as investment or transactional assets.

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