A Dummies Explanation With Examples

Key Takeaway

• Crypto coins and tokens are not the same.
• Coins usually have their own blockchain, but tokens live on another coin’s blockchain.
• Tokens can become coins.
• Bitcoin and Ether are examples of coins while Tether USDT and LINK are examples of tokens.

There are so many types of cryptocurrencies today and they are  mostly grouped into coins and tokens. In fact, the crypto market currently consists of more than 18,000 cryptocurrencies, and more often than not, investors, especially beginners, confuse coins with tokens, and sometimes use them interchangeably. This is quite common because there are so many terms in the crypto space, and it can be overwhelming.

However, there is a significant difference between coins and tokens when talking about crypto, and understanding the difference will help refine your contributions to crypto discussions.

This guide seeks to inform crypto enthusiasts about the difference between crypto coins and tokens.

Our coins vs tokens comparison covers the following:

What are crypto coins?

Coins are a type of cryptocurrency and they have several characteristics that make them unique. One important feature is that they have their own blockchain. In other words, every independent blockchain has a coin. For example, Ethereum is a popular blockchain that has Ether (ETH) as its native coin that powers all activities on the network.

Since crypto coins have their own individual networks, each coin will have its transactions recorded and processed on its own blockchain. For instance, Bitcoin blockchain only facilitates and records BTC transactions, and ETH or other coins cannot be recorded on the network since they belong to other blockchains.

Top 10 examples of crypto coins

There are at least 500 crypto coins in the market, but below are the top 10.

1. Bitcoin (BTC)
2. Ethereum (ETH)
3. Binance Coin (BNB)
4. Solana (SOL)
5. Cardano (ADA)
6. Terra (LUNA)
7. Polkadot (DOT
8. Litecoin (LTC)
9. XRP (XRP)
10. Avalanche (AVAX)

What are crypto tokens?

Crypto tokens may be considered inferior to crypto coins based on their features. Tokens generally don’t have their own blockchain, but depend on a coin’s blockchain to exist. Crypto tokens usually carry token standards such as ERC-20 and Bep-20.  These token standards usually represent the blockchain the token is built on.

Tokens usually act as the native crypto for decentralized applications (dApps) built on smart contract platforms. Tokens depend on the coin of the blockchain they are built on to function. For example, LINK is built on Ethereum, so anyone who wants to use LINK on the network needs ETH to pay for gas fee.

Unlike coins, hundreds to thousands of tokens can coexist on the same blockchain. This is especially true as smart contract applications are easily built, hence giving birth to more crypto tokens. All cryptocurrencies that rely solely on the Ethereum network without having their own blockchains, for example, are tokens.

Top 10 examples of crypto tokens

There are more crypto tokens than coins in the market because as mentioned earlier multiple tokens can exist on the same blockchain. Below are examples of some popular crypto tokens.

1. Tether (USDT)
2. Chainlink (LINK)
3. Shiba Inu (SHIB)
4. Uniswap (UNI)
5. FTX Token (FTT)
6. Decentraland (MANA)
7. Wrapped Bitcoin (WBTC)
8. The Sandbox (SAND)
9. Axie Infinity (AXS)
10. ApeCoin (APE)

Crypto coins vs tokens

Now that you know what coins and tokens are with examples, let’s do a head-to-head comparison of Crypto Coins vs. Tokens.

Similarities between crypto coins and tokens

• Crypto coins and tokens are types of cryptocurrencies
• Crypto coins and tokens are built on blockchains
• Coins and tokens can be traded on crypto exchanges.
• Both coins and tokens can benefit from blockchain bridges.

Differences between crypto coins and tokens

• Coins usually have their own independent blockchain while tokens are built on a coin’s blockchain.
• Multiple tokens can exist on the same blockchain, but most times, only one coin can exist on one blockchain.
• Miners and network validators usually receive coins as rewards, but not tokens.
• Tokens can exist on multiple blockchains but for some coins to exist on other blockchains, they have to be wrapped, for example, Wrapped Bitcoin (WBTC). However, coins can interact with other blockchains through bridges.
• A token can become a coin once the project migrates to its own blockchain. Some cryptocurrencies that started out as a token have become coins.

Do coins have more value than tokens?

Cryptocurrencies, including coins and tokens, are highly volatile and the prices of each asset are determined by many factors, including supply and demand. However, in terms of market capitalization, crypto coins have more value than tokens with Bitcoin and Ethereum taking the lead.

Should I invest in coins or tokens?

As mentioned earlier, coins and tokens are volatile assets and the price movements are affected by many factors including bull and bear seasons.

With that said, both categories of cryptocurrencies are profitable if you invest at the right time. However, there are records of tokens gaining more than 500% in price within a short period, which is quite rare for many coins. Choosing between coins and tokens should also depend on your crypto investment strategy.

Conclusion

In this article, we looked at crypto coins vs tokens with examples, including their similarities and differences. Many people easily misuse the terms even though not all cryptocurrencies are coins. Understanding the difference between tokens and coins will help you to use them the right way when discussing crypto with your peers.