Coins and Tokens: What Are They?
In the world of cryptocurrency, the terms “coins” and “tokens” are often used interchangeably, but they have distinct meanings. Understanding the difference is crucial for anyone entering the crypto space.
What Are Coins?
A coin is a digital currency that operates on its own blockchain. Coins function as a medium of exchange, similar to traditional money, and are primarily used for transactions and value storage.
Key Features of Coins:
✅ Own Blockchain – Coins run on independent blockchains (e.g., Bitcoin runs on the Bitcoin blockchain, Ethereum runs on Ethereum).
✅ Used for Transactions – They facilitate peer-to-peer payments.
✅ Can Be Mined – Some coins use mining (Proof of Work) or staking (Proof of Stake) to validate transactions.
Examples of Coins:
- Bitcoin (BTC) – The first and most well-known cryptocurrency.
- Ethereum (ETH) – Originally a coin, but also supports tokens.
- Litecoin (LTC) – A Bitcoin alternative with faster transactions.
What Are Tokens?
A token is a digital asset built on an existing blockchain. Unlike coins, tokens do not have their own blockchain but use smart contracts to operate on platforms like Ethereum, Binance Smart Chain, or Solana.
Key Features of Tokens:
✅ Built on Existing Blockchains – Tokens rely on platforms like Ethereum (ERC-20 tokens) or Binance Smart Chain (BEP-20 tokens).
✅ Multiple Uses – Can represent ownership, voting rights, access to services, or rewards.
✅ Cannot Be Mined – Tokens are issued through smart contracts rather than mining.
Types of Tokens:
🔹 Utility Tokens – Provide access to a service (e.g., BNB, UNI).
🔹 Security Tokens – Represent investment assets (e.g., tokenized stocks).
🔹 Stablecoins – Pegged to real-world assets like the USD (e.g., USDT, USDC).
🔹 NFTs (Non-Fungible Tokens) – Unique digital assets representing art, collectibles, or real estate.
