While the terms “tokens” and “coins” are often used interchangeably by people in the crypto space, these two are different terms with different meanings. This article will discuss the difference between Crypto Tokens vs. Coins and why it matters.

Both crypto coins and tokens are related to blockchain technology and used to denote digital currencies or cryptocurrencies, they are quite different in terms of purposes and uses.

While crypto coins are cryptocurrencies that are native to their blockchains, crypto tokens are built on top of other blockchains, and crypto coins are built on their native blockchain networks.

Let’s discuss this further in this article.

What Are Crypto Tokens?

Crypto tokens typically leverage existing blockchains to create them rather than having their dedicated or native blockchain network. This means they are created on top of other blockchains, serving as a type of cryptocurrency.

Blockchain technology creates a digital currency known as cryptocurrency to enable peer-to-peer monetary transactions and transfers between two parties located anywhere in the world through a distributed ledger network.

There are two major types of cryptocurrencies, tokens and coins.

Project owners commonly create tokens for new projects by utilizing existing blockchains like Ethereum or others. They primarily do so to raise funds for developing a blockchain-based product or service. These tokens typically serve specific purposes or applications within their respective blockchain networks or projects.

Crypto tokens do not commonly function as currency or for payments; however, they commonly serve to represent something else, which can range from a digital asset to a physical object.

Different types of tokens exist based on their purpose, such as utility (utility tokens), assets (security tokens), governance, or voting (governance tokens).

Non-fungible tokens represent non-fungible assets such as artwork or gaming assets and are another popular type of crypto tokens.

What Are Crypto Coins?

As we mentioned above, crypto tokens are not currencies. But crypto coins are. Crypto coins are native to their blockchains, i.e. they are created for a particular blockchain and are meant to be used for payments within their blockchain ecosystems.

Some popular examples of native crypto coins are BTC (for Bitcoin blockchain), ETH (for Ethereum blockchain), and BNB (for Binance blockchain). Each native blockchain network has its native coin, used for the exchange of value. The Rexx Network Chain, for instance, has the Rexx Coin.

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Crypto coins function as currencies within their native blockchain networks, enabling users to store and exchange value. They differ from tokens in that they facilitate real-world payments directly over the blockchain network.

Miners mine crypto coins in proof-of-work blockchains, or users earn them through staking in proof-of-stake blockchains. Unlike tokens, they do not undergo creation.

Crypto coins or cryptocurrencies can, theoretically, be used for payments, just like fiat currencies. However, the lack of regulations in the blockchain space somewhat limits the real-world applications of crypto coins. They can still be used for storing value, investments, exchange, transfers, and payments.

There is a third type of cryptocurrency, called stablecoin, which is a token but can also be used as a medium of exchange, just like crypto coins. Examples include USDT and USDC.

Why does the difference between crypto tokens vs. coins matter?

Because a crypto token and a coin are two different things, it is crucial to understand their differences and respective features and significance to make informed decisions.

If you’re a blockchain project creator wondering whether you should create a coin or a token, the choice is simple — when building your own blockchain, you need a coin, otherwise, you need a token.

If you’re planning to invest in cryptocurrencies, do your own research about coins and tokens before investing. The potential to grow will depend on the particular use cases of a coin or token, so make sure to study the project carefully.

Know your cryptocurrency before investing in the market.

Crypto Tokens vs. Coins

So, here’s everything you need to know about the difference between crypto tokens vs. coins:

Platform

While coins are built into their native blockchains, tokens are built on top of existing blockchains.

Creation

Blockchain developers create tokens using smart contracts, while network participants mint or stake crypto coins using predefined methods.

Development Time

Coins take considerable time, resources, and skills to build, while crypto tokens are relatively easier to build and take less time.

Purpose

The major use of crypto coins is to store or transfer value. Tokens, on the other hand, can have a variety of uses, ranging from utility, security, asset representation, and governance.

Use Cases

Crypto coins enable users to make payments with any merchant accepting cryptocurrency. However, the utilization of crypto tokens is restricted to specific projects or merchants.

Examples

Examples of coins include Bitcoin, ETH, REXX, and BNB. Some Examples of tokens include Maker (MKR), Uniswap (UNI), and Decentraland (MANA).

In conclusion, anyone involved in the cryptocurrency space, whether as a developer, investor, or enthusiast, must understand the vital distinction between crypto tokens and coins. While both tokens and coins are integral to blockchain technology, they fulfill distinct purposes and possess unique characteristics.

Crypto coins, such as Bitcoin and Ethereum, are native to their respective blockchains and primarily function as a medium of exchange or store of value within their ecosystems. Crypto tokens, on the other hand, build on existing blockchain platforms and serve various purposes, from facilitating fundraising for projects to representing digital assets or providing governance rights.

Originally published at https://coinrexx.com on April 16, 2024.