What Is the Difference Between a Crypto Coin and a Token?

It’s usual for people to think that cryptocurrency and tokens are the same things. However, they’re not.

While some believe they’re synonyms, others straight up have no clue what they are.

We threw out a poll on Twitter and over 75% of people admitted they didn’t know the difference between a coin and a token. So, we’re here to clear things up.

To put in simple terms:

A coin is used to pay for goods and is a replacement for traditional money.
E.g. BTC, ETH, and ADA

A token offers utility through a service of some kind or represents an asset.
E.g. USDT, MANA, and LINK**

Tokens still hold monetary value. They can be traded, swapped, or sold for their market price just as coins can. However, their sole purpose is not to replace traditional money.

Let’s dive a little deeper…

What Is A Crypto Coin? 💰

As we’ve covered, a cryptocurrency coin is a direct competitor to traditional money like the US Dollar. However, they offer a lot more than just value.

Coins operate on their own blockchain; these projects are also known as Layer 1 cryptocurrency projects. This means that all transactions of a coin are logged on its native blockchain.

For example, all ETH transactions can be found on the Ethereum blockchain using tools like EtherScan.io.

This means that cryptocurrency coins are self-reliant, as they do not require someone else’s blockchain to host their project.

Okay, so, we said coins and tokens are not the same. But… sometimes they are. All crypto coins are tokens but not all tokens are coins. Just like all poodles being dogs but not all dogs being poodles.

This is because coins are the native token of a Layer 1 blockchain (the base network), meaning that each blockchain will have its own crypto coin. For example, Cardano has ADA, Bitcoin has BTC, and Solana has SOL.

TL;DR: crypto coins are the native token of a blockchain.

What Is A Cryptocurrency Token? 🔧

Tokens don’t have their own blockchain. Instead, they are built upon a Layer 1 protocol that will have its own crypto coin. The token will offer a service or utility to the blockchain’s ecosystem that the coin does not.

For example, the MANA token is built on the Ethereum blockchain. It offers the utility of interacting with the Decentraland metaverse — buying and selling in-game items, land, etc.

You cannot use ETH in Decentraland, despite being built on its blockchain. This is what makes MANA a token and not a coin.

Unlike coins, which simply use their blockchain to record transactions, tokens rely on smart contracts. The blockchain takes the code of a smart contract, reads it, and then completes the trade.

When a token is swapped, traded, or spent it moves digital location — from one wallet to another.

This is unlike coins, which don’t move; instead, the blockchain records how much of the coin people hold through a ledger. This is a decentralized digital file that records every transaction and everyone’s “bank balance” on the blockchain.

QUICK TIP: If you’re struggling to define if something is a coin or token, look it up on CoinMarketCap. CoinMarketCap will show whether it’s a coin or a token next to its rank.

Key Differences between a crypto coin and a toke Simplified

How about we put everything we’ve covered into a few bullet points:

Coins are:

• A medium of exchange
• A store of value
• Stored on their own blockchain
• Balances are recorded using a ledger

Tokens are:

• An asset, utility, or service
• Provide utility
• Stored on a blockchain that isn’t it’s own
• Moves location when traded, swapped or sold

How Does A Crypto Token Affect A Crypto Coin’s Price?

A crypto token’s price will fluctuate due to the demand for the token. If Decentraland increases in users and more people want to spend money on the game, its token (MANA) will increase in value.

Whereas, a crypto coin’s price will move depending on the success of its entire ecosystem. For example, Ethereum’s price will go up if its entire ecosystem is healthy and sought after — not just…