Deeply understand the fundamental difference between Token and Coin, and master the correct investment direction

What Exactly Is a Token?

A Token is a digital asset built on an existing blockchain, representing specific rights, certificates, or value claims, and can be traded, transferred, and exchanged on its respective chain.

In the early crypto ecosystem, the main term used was Coin—Bitcoin, Litecoin, Dogecoin are typical examples, clearly distinguished from each other. However, the emergence of Ethereum completely changed this landscape. The ERC-20 standard introduced in 2015 enabled any developer to issue their own Token on Ethereum, leading to a mixed usage of Coin and Token, both often translated as “tokens” or “cryptocurrencies” in Chinese, which has caused confusion among many investors regarding their differences.

As of now, Ethereum remains the blockchain with the largest issuance of Tokens worldwide. It’s important to note that Token is a collective concept, not a specific coin name. Simply put, digital assets that are not on public chains can all be categorized as Tokens, including DeFi tokens, Layer-2/Layer-3 application coins, NFT-related tokens (such as APE, SAND), and others.

How Are Tokens Classified? Application Scenarios for Different Types

According to the classification standards of the Swiss Financial Market Supervisory Authority (FINMA), Tokens can be divided into three main categories:

Payment Tokens (Payment Tokens) Primarily used for secure and efficient transaction settlement, characterized by low fees and fast confirmation times. Stablecoins are a typical example of this category, as they maintain value stability by pegging to fiat currencies or assets.

Utility Tokens (Utility Tokens) Exist as access passes to application services. Most ERC-20 tokens on Ethereum belong to this category. Holders can use Tokens to access various services within the ecosystem or to participate in voting.

Asset Tokens (Asset Tokens) Represent ownership rights to a project or asset, similar to traditional stocks. Holding such a Token means becoming a participant in the project and enjoying benefits from token appreciation. It should be clarified that in the crypto space, asset Tokens usually do not involve actual ownership of the project or dividend rights.

The real-world situation is far more complex—a single Token often exhibits two or even three of these characteristics simultaneously, making classification difficult. This complexity is a core feature of the Token market.

What Is the Core Difference Between Coin and Token?

The fundamental difference is that Coins have their own independent blockchain infrastructure, while Tokens are built on existing chains.

Bitcoin (BTC) runs on the Bitcoin blockchain, and Ether (ETH) runs on the Ethereum blockchain; they are the native assets of their respective networks. In contrast, Tokens do not have their own independent chain but operate within existing ecosystems. This intrinsic difference directly impacts their ecological applications.

From the table, it’s clear that they differ significantly in infrastructure, functional positioning, and issuance mechanisms.

Invest in Coins or Tokens? Each Has Its Advantages

This question itself is somewhat biased—Coins and Tokens are closely related and both are indispensable parts of the crypto ecosystem.

Think of Coins as Layer-1 public chain assets, while Tokens are application-layer assets built on top. The former addresses infrastructure issues, and the latter develops specific applications and services based on that infrastructure. Their roles are different but both are essential.

The advantage of Tokens lies in their far greater scalability for applications. Developers can easily launch new applications and services without modifying the underlying chain. If a Coin fails, there are often no alternatives—examples include Quantum Chain (QTUM) and Bytom (BTM). If a Token project’s application is unpopular, it can quickly pivot or launch new products; for example, MakerDAO’s RWA business is a typical case.

Another key difference is volatility. Tokens tend to be more volatile than Coins; for instance, UNI, SNX, and MKR often fluctuate more than BTC and ETH, especially in bull markets. This creates more opportunities for short-term traders but also entails higher risks.

Two Paths for Token Investment

Spot Trading: Holding Actual Assets

Spot trading involves actual assets, with complete delivery between buyer and seller. For example, if UNI is priced at $3, the buyer pays $3 to obtain ownership of one UNI, and the transaction is complete.

Be sure to guard against fake tokens. A high-value token ABC developed by a certain team may attract attention, but other teams might also issue tokens with the same name ABC. Although the names are identical, they may have no real value or might not be listed on exchanges, making them impossible to cash out after purchase. The way to prevent this is to verify the contract address on the official website or blockchain explorer to ensure you are buying the genuine Token.

Margin Trading: Amplify Returns with Leverage

Unlike full payment in spot trading, margin trading requires only a portion of funds as collateral to control a larger position. For example, using 10x leverage to go long on UNI: if the price is $3, only $0.3 is needed to establish a 1 UNI position.

Margin trading usually does not involve actual Token holdings, thus avoiding fake token risks, but it introduces liquidation risk. Token volatility is generally higher than Coins; new tokens are especially volatile, with daily fluctuations exceeding 10% not uncommon. Therefore, leverage should be strictly controlled—preferably not exceeding 10x—and reasonable stop-loss levels should be set.

Practical Process of Token Trading

Whether spot or margin trading, the basic steps are similar:

Step 1: Choose a secure platform and complete verification Select a reputable trading platform regulated by authoritative agencies. Complete identity verification and fund deposits.

Step 2: Search and locate the target Token Enter the Token code (e.g., UNI) in the platform’s search box and confirm the project information is correct.

Step 3: Set trading parameters and place an order Fill in buy/sell direction, quantity, leverage (if applicable), and stop-loss/take-profit levels according to your trading needs, then confirm and submit the order.

The entire process is simple and efficient, provided you choose a legitimate platform and manage risks properly.

Summary: Core Points of Token Investment

Although Tokens and Coins are fundamentally different, both are important asset classes within the crypto ecosystem. Tokens offer higher application flexibility and volatility, suitable for investors with different risk preferences. Whether engaging in spot or leveraged trading, the most critical factors are choosing a safe and reliable trading platform, understanding real risks, and avoiding blind following.