• Thu. May 23rd, 2024

Cryptocurrency Tokens vs. Coins – What’s the Difference?

Louise Villalobos

ByLouise Villalobos

May 13, 2024
Cryptocurrency Tokens vs. Coins - What's the Difference?

Many crypto enthusiasts use the terms coins and tokens interchangeably. However, the two terms have different meanings, which we will discuss in this article. Read on to learn more.

What is a Cryptocurrency Coin?

Simply put, a cryptocurrency coin is a digital asset native to a particular blockchain. In other words, this coin is built into a network itself instead of atop the network. For example, the native coin for the Ethereum network is Ether, while that for Bitcoin is BTC.


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How Crypto Coins Work

Cryptocurrency coins are created using two methods: the account and the unspent transaction output (UTXO) model. Litecoin and Bitcoin have adopted the UTX model, while most chains, including BNB Chain and Ethereum, employ the account model.

Use Cases of Crypto Coin

Blockchains store transaction data, which is processed and secured by a network of nodes distributed across the world. Entities that operate the nodes are normally rewarded with crypto coins.

Furthermore, crypto coins are used by blockchain users to pay for transaction/gas fees, which are part of node operators’ revenue.

Popular Cryptocurrency Coins

1. BTC: As mentioned earlier, BTC is the native coin of the oldest blockchain, Bitcoin, created by pseudonymous developer Satoshi Nakamoto. It is the largest coin by market cap, according to data from CoinMarketCap.

2. Ether: This coin powers the Ethereum ecosystem. It allows Web3 developers to create and launch decentralized applications on Ethereum.

3. SOL: This coin is used by Solana users to pay for gas fees. Its smallest unit is known as Lamport.

4. AVAX: Avalanche developers need to pay for gas fees using AVAX when creating and launching subnets.

5. ATOM: This coin is native to the Cosmos ecosystem, which comprises a network of blockchains that share information and communicate.

What is a Cryptocurrency Token?

Creators of cryptocurrency tokens do not build them directly into blockchains but rather create them using smart contracts. Most blockchains have rolled out token standards to allow token creators to develop their digital assets.

The ERC-20 standard is one of the well-known token standards. It guides Ethereum developers on how to create cryptocurrency tokens. Other standards include BRC-20 for Bitcoin, BEP-20 for BNB, and SPL for Solana.

How Crypto Tokens Work

Token creators have the ability to detect the behavior of their assets. Using smart contracts, these creators can specify the functionality of their tokens. A smart contract serves as a ledger, keeping records of transactions involving a particular token. Considering the growing cases of cyberattacks, token developers are advised to write smart contracts for their projects using well-tested token standards.

Use Cases of Crypto Tokens

Governance: A crypto token can give its holders voting rights, allowing them to be part of the governance system of a particular DAO (decentralized autonomous organization).

Utility: Tokens with utility allow holders to access certain products and services. For instance, a token can be used as a currency in a game to allow players to buy boosts.

Medium of exchange: Crypto users can use tokens to purchase digital items.

Speculation: Tokens like meme coins are considered investments, carrying the potential for massive returns when their prices surge.

Popular Cryptocurrency Tokens

1. LINK: This token runs on Chainlink, a protocol that provides infrastructure for bridging and cross-chain communication.

2. GRP: It powers the Web3 version of Google, The Graph, which indexes data stored on various blockchains, allowing developers to search and use public information to create decentralized apps.

3. RNDR: This token is used in the Render GPU marketplace, where sellers rent out GPU power to buyers who use it in graphic rendering.

4. UNI: This crypto token plays a key role in the governance system of popular decentralized exchange Uniswap.

5. GALA: With this token, you can buy various assets on the Gala Games gaming platform.

Are Stablecoins Crypto Tokens or Coins?

It is easy for some to call stablecoins crypto coins, given the name. However, stablecoins are crypto tokens since they are created on top of popular blockchains.

Louise Villalobos

Louise Villalobos

Louise Villalobos is an adept writer, renowned for her compelling articles that illuminate and engage. Her prowess in breaking down intricate subjects provides readers with clarity and nuance. With a vast and varied portfolio, Louise has solidified her standing as a distinguished voice in contemporary journalism.