Difference between Crypto coins vs. Token

Introduction

Crypto Coins vs. tokens what's the difference? Are they even different? On the surface, they may seem similar, mainly since the terms are commonly used interchangeably, but that's not the case due to the fundamental differences that distinguish them.

First off, while all coins may be considered tokens, not all tokens are considered coins. That said, coins have blockchains, whereas tokens are built on an existing blockchain.

Coin & Token Explained

Think of any blockchain, say Ethereum. Its native asset is either right or algorand on the algorand blockchain ada on Cardano. These are all coins. On the other hand, tokens would exist on pre-existing blockchains.

Let's take Ethereum and uni-swap as examples. Uniswap's native digital asset is known as uni. Since uni is built on a pre-existing blockchain, Ethereum qualifies as a token. From this, it's clear that creating a coin is more complex than creating a token you may find a blockchain having only one coin but hundreds or thousands of tokens built on top of it.

Use Cases

The difference does not lie in their fundamentals alone but in use cases too. Some coins, such as bitcoin, are mainly perceived as a store of value by offering an alternative to traditional banking.

Other coins focus on digital transactions, which are typically designed to be faster and cheaper. Some coins are designed to solve specific problems, like xrp by ripple, which is used to address cross-border payment problems. They aim to make processing real-time international transactions easier by leveraging the power of the blockchain. Tokens, on the other hand, are popular in decentralized apps. They represent something specific in these decentralized apps. This could be economic value a stake or even voting rights, facilitating and encouraging protocol interactions.

They are typically tied to many functions within their native ecosystem. For instance, sushi, a sushi swap's native Token, is used for Staking, Governance, and even to reward users who deposit assets into liquidity pools. Another cool thing about tokens lies in their power to represent assets through a process known as tokenization.

Asset tokenization is not limited to just digital assets. It has also been used to represent physical assets such as real estate on the blockchain. As you can see, tokens use cases are much more flexible, and their possibilities may be endless.

Difference between Coin & Tokens

Conclusion

Coins and tokens are the two digital assets most commonly used on blockchain networks. The significant difference between the two is that even though crypto tokens are based on an existing blockchain, cryptocurrencies possess their blockchains.

Author Bio

I am Simran Advani. I work as a Content writer at Reveation Labs. We are an established Blockchain Consulting and Development Company based in the US, founded to empower businesses with solutions using the latest technologies.