There is a bit of difference between crypto coins and crypto tokens. The little difference between them must not be overlooked because of how complicated the crypto market can be. Classifying cryptocurrencies into coins and tokens will give you a better understanding of the crypto market.
Difference between Coins and Tokens
It is quite easy to confuse a coin with a token at the beginning of your crypto journey. However, both of them are similar on a fundamental level. You can swap tokens for coins and vice versa. The major difference between these two is their utility. You can do some things with coins but not with tokens.
In contrast, some markets will accept tokens but not coins. In most cases, many crypto users usually own both tokens and coins. Taking a look at each of them will let you know the most significant distinction between them.
A coin is any cryptocurrency with an independent, standalone blockchain. One typical example of such is Bitcoin. The broader network of crypto is precisely designed to achieve a specific goal. For instance, Bitcoin exists as a store that is resistant to censorship of value and a medium of exchange that has a fixed, secure monetary policy.
BTC, the native coin of Bitcoin, is the most liquid cryptocurrency in the market. It has the highest market cap in the crypto sector. The inspiration of coin projects is mostly drawn from other cryptocurrencies or past technologies. This inspiration is fused to cater to a specific purpose through an innovative network.
Ethereum is another example of a coin. Ethereum's native coin is Ether. Instead of focusing on financial data, the focus of Ethereum is on an arbitrary program that can cover anything from social media to games. Ether is used for paying a gas fee, managing assets, and interacting with decentralized applications on the network.
Furthermore, all other coins that are not Bitcoin are referred to as Altcoins. Some examples include NEO, Bitcoin Cash, Ripple, Ethereum, Litecoin, etc.
You can find the types of coin and their total market value here.
Tokens are unlike coins because they do not have their standalone blockchain. Rather, they operate on the blockchain of other crypto coins like Ethereum. Tether, BNT, BAT, and many other stablecoins like USDC are some of the most commonly seen tokens on Ethereum blockchain.
Instead of its transactions being handled by blockchain like a crypto coin, tokens are reliant on smart contracts. They are an array of codes that makes trades and payments between users easier. Every single blockchain here has its smart contract. For instance, NEO makes use of Nep-5, and Ethereum uses ERC-20.
Also, a token physically moves from one place to another when spent. The trading of NFTs is a good example of this. NFTs only carry artistic or sentimental value. This makes them similar to utility tokens except that they cannot provide a service.
Furthermore, tokens, once created are often utilized to activate the features of the application they were initially designed for. Some common tokens are Golem (GNT), Komodo (KMD), Augur (REP), Ox, Maker (MKR), and Dai.
It is a misconception that there is no difference between a crypto token and a crypto coin. Although both are sometimes used interchangeably, they do not mean the same thing. Simply put, coins are the digital version of money with its standalone blockchain, while tokens stand for assets or deeds and do not have their blockchain.