Coins and tokens, standard coins and token coins… Are they the same? What is the difference between a coin and a token? When hundreds of new cryptocurrencies appear, the boundaries between them can look erased. One cryptocurrency may be called a coin, a token, or else. Many people think that it’s the same, but it’s not, coins and tokens have dissimilarities. We’ve prepared a clear list of them and you are welcome to check it below!
- The first (and the most important) feature is that a coin is functioning on its own blockchain.
- The second coin feature is that it can be used to pay for goods or services. It cannot be applied for all coins nowadays, i.e. some less known coins cannot be used for this purpose.
- Another characteristic here is that new coins are being mined.
- In its turn, a token doesn’t have a blockchain. 90% of tokens are issued on the Ethereum blockchain.
- You cannot pay with a token in any place you want. Tokens may be used as a payment instrument within a certain platform. They give you access to specific services. Let’s say, a coin could be called “a real money” that can be used for payment everywhere when a token is a “subway token” – you can pay with it only within a platform where they were issued. However, if a token is added to an exchange, it can be exchanged to fiat money at the current rate the same way as any coin.
- Opposed to coins, tokens cannot be mined. They are all issued at the same time. Sometimes and additional emission is possible but not mining.
- Depending on its functions, tokens can be divided into equity tokens (a company shares on a blockchain) and utility tokens (tokens with real useability – the most common kind of tokens). Utility tokens can be sold during ICO, used for additional activities, or for example, as SWAP be an essential component of the Loyalty Program. There are some other types of tokens but in most cases, tokens either have equity or utility purposes.
- Tokens usually have more functions than coins do. They can serve as evidence of ownership, be used for pools and votes. Even if tokens are not omni-purpose, they have a lot of useful opportunities.
- Moreover, from the tech angle, it’s much easier to create a token on an existing blockchain.
How to check if cryptocurrency belongs to coins or tokens
If you go to Coinmarketcap.com, you can see that there are divisions that can help you to differ coins from tokens. There is the full list of cryptocurrencies at the main page, but using a drop-down list it is possible to choose “Coins only” or “Tokens only”.
Furthermore, you can always check this information on the official website of the crypto project that has its own tokens or coins.
It is also worth mentioning that there are cryptocurrencies that initially were created on alien blockchains as tokens, but after some time their own blockchains were developed and they were turned into coins.
- For example, NIMIQ (NIM) coin. Before producing its own blockchain there were Nimiq (NET) tokens based on the Ethereum blockchain. But after the launch of the main network, users were able to exchange NET to NIM at the rate of 1 NIM=10 NET.
- Another example is TRON (TRX). Initially, TRON was launched on the Ethereum blockchain, and TRX were ERC20 tokens, but after the completion of the ICO in the summer of 2018, the cryptocurrency moved to its own blockchain.
- ZIL was originally an ERC-20 token based on the Ethereum blockchain too. The Zilliqa network was launched at the end of January 2019. With this launch, the ERC-20 ZIL tokens are being replaced. Moreover, with the launch of the mainnet, Zilliqa has moved to an independent cryptocurrency.
- VeChain (VEN at that time) was initially an ERC-20 token based on the Ethereum blockchain. In June 2018, when the mainnet was launched, token holders received 100 VET coins for every 1 VEN token they had.
- In the beginning, the Theta platform and its tokens were based on the Ethereum blockchain. As in the cases above, there was the mainnet launch and transition to its own blockchain which led to the appearance of the THETA coin.
- There are other tokens that became coins and even more to come in the future. Here is a list of some of them: POA Network (POA), New Kind of Network (NKN), IoTex (IOTX), GoChain (GO), CyberMiles (CMT).
If someone wants to become a crypto enthusiast or invest in cryptocurrency, they should understand the difference between a coin and a token. Thank you for your attention, we hope that this article will help you to avoid confusion with crypto terms and concepts.