Cryptocurrency has two forms: coins and tokens. While both can be bought on exchanges and stored together in the same crypto wallet, they are not quite the same thing. The main difference being that although either can act as a form of payment, a coin operates on its own independent blockchain platform, whereas a token operates on another existing platform.
Key Things to Know About Coins
- As the name suggests, a coin is a digital form of payment—the crypto version of government-issued money (fiat).
- It can be exchanged for fiat money and used as payment within its own blockchain. For example, DOT on the Polkadot blockchain.
- Coins have little utility beyond being digital currency. You can mine them, HODL them in your wallet, and buy and sell things with them, but that’s about it.
- Bitcoin is the original cryptocurrency coin. Litecoin emerged from a hard fork from Bitcoin in 2011.
- Some coins, like Bitcoin, have a limited supply, so their value is influenced by supply and demand.
Currently these are the most popular coins shown on CoinGecko.
Key Things to Know About Tokens
- A token can act as a form of payment, but its main purpose is to be used within a blockchain’s wider ecosystem.
- Tokens can be handed out as a form of reward for partaking in an activity within a blockchain platform.
- The most common platform for tokens is Ethereum. These are known as ERC20 tokens.
- Many tokens are designed to power decentralized applications (DApps) on the Etehreum blockchain.
- Tokens are simpler to create than coins because a developer can simply follow a template approach on the chosen blockchain.
- Different types of tokens include:
- asset tokens (linked to real-world assets like real estate)
- utility tokens (tokens that grant users access to services)
- security tokens (digital assets likeable to the crypto version of shares in a digital company)
non-fungible tokens (or NFTs, which can be used to represent items such as photos, videos, and other types of digital files)
Finding Out the Platform a Token Is On
On popular price-tracking sites, like CoinMarketCap, you can filter assets to only see tokens. On this list, you will see a column showing which platform a token is on. For example, below you will see that Tether is a token on the Ethereum platform.