In the crypto world, there are cryptoassets called coins and others called tokens. They look the same, but they are actually different. So, what are the differences?

The idea for this article came to me during a discussion with a friend who lived in another island via WhatsApp. I invited him to exchange ideas about the crypto world, because I knew very well that he had talked a lot about Bitcoin, etc. when we last met almost a year ago.

In the excitement of the conversation, there were several things that I thought were not properly understood by the friend. Even if you look further, for example by listening to this theme on the social media timeline, not a few also have that understanding.

If among netizens who love football there are still many misunderstandings about the terms naturalization, descent or abroad, the same is true among cryptomania. It turns out that there are still those who, for example, cannot even distinguish between coins and tokens.

What's the difference? There may be those who ask this question.

At first glance, they are indeed the same. Especially if the focus is only on profit, it is not important to understand such terms as long as they provide profit. Want token kek, coin kek, even meme coin kek, the important thing is to give towering profits.

But for those who want to truly understand the crypto world as a whole, of course these kinds of trivial things should not be misunderstood. Because in reality, they are indeed two different things.

Coins and Block Chains

The first and foremost difference between these two digital assets lies in their relationship to a blockchain. Coins are the primary cryptocurrency on a blockchain, while tokens generally 'hitch a ride' on an existing network or ecosystem.

As the main cryptocurrency, a coin serves as a unit of value that becomes the benchmark for all types of transactions. This includes paying the fees incurred when making these transactions.

Therefore, a coin is only valid on one particular blockchain. Another block chain, another coin. The Bitcoin ecosystem has BTC, while Ethereum and Solana have ETH and SOL respectively.

SOL can only be used for transactions within the Solana ecosystem. Similarly, ETH and BTC can only be used within their respective block chains.

If we bring it to our daily lives, coins are like the currency of a country. In Indonesia, there is the Rupiah (IDR), where it is determined by the Government that all transactions within the territory of this country must be in IDR.

If somebody from abroad like our national football team's naturalized players Jay Idzes or Thom Haye come here with Euros, they can't spend them at local store or Holland Bakery. It must be exchanged into Rupiah first.

Conversely, if we want to go to Malaysia, for example, any amount of IDR is worthless there. After being exchanged into Malaysian Ringgit (RM), it can then be spent on souvenirs or buying food at Bukit Bintang streetfood stalls.

Such is the case with a coin in the crypto world. SOL cannot be used to transact in the Ethereum or Bitcoin ecosystem and vice versa.

Based on the nature of its use, coins can be divided into at least four types:

• Native Coins, which are coins native to a blockchain that serve as the main cryptocurrency in the ecosystem. Examples include SOL on the Solana network, ETH on Ethereum, and BTC on Bitcoin.
• Forked Coins, which are coins that are built separately, in different branches, but are still on the same blockchain. For example, Ethereum Classic (ETC), Bitcoin Cash (BCH), or Bitcoin SV (BSV).
• Wrapped Coins, can simply be interpreted as a representation of a particular network's coins or digital assets within another network. This type of coin allows users to access cross-ecosystem functionality and liquidity. Examples are Wrapped Ether (WETH) and Wrapped Bitcoin (WBTC).
• Stablecoins, a type of coin that is almost similar to wrapped coins, except that its value is based on the value of other assets such as gold or fiat currencies. Their creation aims to maintain stability while reducing price volatility in crypto trading. For example, USD Coin (USDC) and USD Tether (USDT) are both kept at the same value as the US dollar.

Tokens and Their Types

Now we get to tokens. As mentioned above, this digital asset is like a coin but the difference is that it is not the main currency in a blockchain and has a different function and role for crypto world activities.

While coins can only be used within the original blockchain, tokens are more flexible across various ecosystems. Thus, the owner can transfer a token from one network to another in its original form without having to exchange it into another unit.

Then if coins function as currency, units of value and security guards of an ecosystem, tokens have more diverse functions. Among them are as a share or ownership of something, as a utility tool, representation of voting rights in a community, and many more.

But unlike coins that apply to all activities in the ecosystem, the use of tokens is more specific. We can only use a token where it is accepted. Usually in applications or services where the token is used as an exchange rate.

Even if they are both running on the same blockchain, Solana for example, one service or application does not accept tokens created by another service or application. So, the tokens must first be exchanged into SOL or stablecoins like USDC.

If you want to compare it to everyday practice, the Disneyland card is a kind of token for its users. The balance on the card can only be used within Disneyland, not at other similar playgrounds.

If we want to move to Legoland, for example, then we must first buy a Legoland card to be able to enjoy the games inside. No matter how much balance is in the Disneyland card, it will not be worth it in Legoland.

Or in another form is Shopee coins for users of this marketplace that is identical to the color orange. Shopee coins can only be used at Shopee, whether for shopping or paying bills, it cannot be bought ice cream at Walmart.

Now let's take a look at the types of tokens based on their functions:

• Utility Tokens, are a type of token that provides access to certain services or functions within a block chain or Decentralized Application (dApp). For example, ME tokens in Magic Eden, LINK in Chainlink, UNI in Uniswap.
• Governance Tokens, are a form of representation for users in the governance of a service or community. For example, JUP tokens are the basis for ownership of voting rights for users / members of the Jupiter community in every vote held by the decentralized exchange (DEX) manager.
• Security Tokens, as the name implies, function as a digital form of a securities asset, for example shares or debt securities, so they are subject to the rules that bind securities. This type of token represents ownership of the digitized offline asset. An example of a player in this space is POLY (Polymath), a dApp that allows tokenization of real assets into digital form.
• Non-fungible Tokens (NFTs), a type of token that represents a digital collection, such as a work of art or a piece of pottery. These tokens are generally not interchangeable with other tokens or coins.

For the latter, Pudgy Penguins, the most successful NFT in the crypto world, has just issued its own token called PENGU. Apart from being a major utility tool within the community, PENGU can also be traded freely on DEXs like Jupiter.

In short, a token can grow to be more inclusive. From only covering one community, it becomes a more general token that can even cross ecosystems.

There are even tokens that later turn into coins. Take BNB or Binance Coin, which used to be an ERC-20 token in the Ethereum block chain.

Binance itself is growing as the world's largest cryptocurrency exchange. When the company built its own ecosystem called Binance Smart Chain, BNB became the main coin in the ecosystem.

That's more or less the difference between coins and tokens in the crypto world as far as I understand. If anyone wants to correct or provide additional information, the comments column is always open.