In the world of cryptocurrencies, you often come across the terms coins and tokens. Both are often used interchangeably, but have fundamentally different functions and areas of application.

What are coins?

Coins are native currencies of a blockchain. They primarily serve as a means of payment or store of value and enable transactions within the respective network. Examples of this are

• Bitcoin (BTC) Bitcoin (BTC) Bitcoin is the world’s first and best-known cryptocurrency, which was introduced in 2009 by an anonymous person or group under the pseudonym Satoshi Nakamoto. It is based on decentralized, transparent blockchain technology that documents transactions securely and immutably. Unlike conventional currencies, Bitcoin is neither controlled by a central bank nor by governments. New Bitcoins are created through a…: The first and best-known coin designed as a digital means of payment.
• Ethereum (ETH) Ethereum (ETH) Ethereum is a leading platform for decentralized applications (DApps) and smart contracts, which was launched in 2015 by Vitalik Buterin and a team of developers. The platform is based on its own blockchain, which is more flexible than that of Bitcoin and enables developers to create their own programs directly on it. Ethereum’s cryptocurrency is called Ether (ETH)…: The native currency of the Ethereum blockchain, which also supports smart contracts.

Coins are directly integrated into the blockchain and are created through mining or other consensus mechanisms such as proof-of-stake.

What are tokens?

Tokens, on the other hand, are digital assets created on an existing blockchain. They use the infrastructure of the underlying blockchain to fulfill their own purposes. Tokens are often developed for specific use cases, e.g:

• Utility tokens: Enable access to certain services (e.g. Binance Coin, BNB).
• Security tokens: Represent assets such as shares or real estate.
• NFTs (non-fungible tokens): Unique digital collectibles, often used for art or gaming.

A well-known example is the ERC-20 standard on the Ethereum blockchain, which standardizes the creation of tokens.

Coins vs. tokens: technical differences

A decisive technical difference lies in the blockchain infrastructure:

• Coins are built directly into the blockchain and have their own transaction history and network.
• Tokens, on the other hand, use an existing blockchain such as Ethereum, Binance Smart Chain or Solana. They share the infrastructure and do not require their own blockchain.

These differences also influence the use of the two types of cryptocurrencies. Coins mainly serve as digital cash, while tokens often fulfill specific functions in decentralized applications (dApps).

The main difference:

Coins are independent currencies with their own blockchain, while tokens are based on an existing blockchain and represent assets or access rights.

A comparison: coins are like the money in your wallet, while tokens are more like tickets or vouchers that you can use for specific purposes.

Further information

The topic is clearly explained in the following YouTube video:

You can find more information in the YouTube video by DeFiChain Explainer or in the explanation by Kraken, which also explains the difference between coins and tokens in detail.

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