From Coin to Token: The Essential Difference Every Crypto Investor Must Know

A Confusing Concept

Bitcoin, Litecoin, Dogecoin — these early Crypto are all called Coins. After Ethereum appeared, a large number of Tokens flooded the market, and the Chinese translations all became “tokens” or “Crypto,” causing investors to confuse them. In fact, there is an essential difference between the two, and understanding this is crucial for your investment decisions.

What exactly is a Token?

A Token is a vehicle representing specific rights, certificates, or digital assets that can be traded, transferred, or exchanged on the blockchain. Simply put, it’s like a pass or stock certificate.

An important feature of Tokens is: they do not have their own native blockchain. After Ethereum launched the ERC-20 standard in 2015, any developer could issue Tokens on Ethereum. Today, Ethereum remains the blockchain with the largest Token issuance. This includes DeFi tokens, Layer-2 ecosystem coins, NFT-related tokens (such as APE, SAND), all falling under the category of Tokens.

How are Tokens classified?

According to the definition by the Swiss financial regulatory authority, Tokens are mainly divided into three categories:

Payment Tokens are used for efficient, low-cost value transfer; stablecoins are a typical example.

Utility Tokens serve as tickets to application ecosystems, granting holders access to specific services. Most ERC-20 tokens on Ethereum belong to this category.

Asset-backed Tokens represent rights to a project. Holding them means you are a participant in the project and can share in the token’s value growth. But note, the crypto world usually does not involve legal company ownership or dividend rights.

In practice, a Token often possesses multiple attributes simultaneously, and the boundaries between categories are blurred.

Coin vs Token: The Essential Difference

The fundamental difference lies in ownership. Coins have their own independent blockchain — Bitcoin runs on the Bitcoin network, Ether runs on Ethereum; they are the native assets of these networks. Tokens, on the other hand, are attached to existing blockchains and do not have independent infrastructure.

This leads to chain reactions:

Functional dimension: Coins are mainly used for payments and staking; Tokens support a wider range of applications such as payments, staking, voting, etc.

Layer level: Coins belong to Layer-1 infrastructure; Tokens are mostly Layer-2 or Layer-3 application layer assets.

Ecological potential: The ecosystem of Coins is limited to infrastructure optimization (for example, attempts like Quantum Chain or BSC often fail); Tokens can extend infinitely at the application layer (MakerDAO’s RWA business is an example).

Volatility: Token prices are usually much more volatile than Coins. The price swings of UNI, SNX, MKR often exceed BTC and ETH, especially during bull markets, creating more opportunities for short-term investors but also higher risks.

How to invest in Tokens?

Spot Trading: Hold the asset directly

For example, if the current price of UNI is $3, buying 1 UNI immediately grants full ownership. The advantage is controlled risk; the disadvantage is the need for full capital.

But beware of fake tokens. When a token becomes popular, teams may issue fake tokens with the same name but no real value. Protective measures: verify the token contract address on the official website or blockchain explorer to confirm its uniqueness.

Margin Trading: Leverage to amplify gains

Using 10x leverage to go long on UNI, a $3 token can be controlled with just $0.3 margin. Contract trading and U-based futures do not require actual holding of Tokens.

Key tip: Token prices are highly volatile, so be sure to control leverage (recommended not to exceed 10x). Emerging Tokens are especially prone to skyrocketing / surge and plummeting, with higher liquidation risks than Coins.

Should you invest in Tokens or Coins?

Both are complementary rather than opposing. Coins solve infrastructure issues, while Tokens provide diversified applications on top of them, directly serving users. When choosing, ask yourself:

• Are you optimistic about the future of blockchain infrastructure? → Invest in Coins
• Are you confident in the development of specific application ecosystems? → Invest in Tokens
• Do you have a strong risk tolerance? → Token volatility offers more profit opportunities
• Are you a conservative investor? → Coins tend to be less volatile

Regardless of your choice, the most important thing is to select a secure, regulated trading platform. Set stop-loss and take-profit orders, control your positions, and stick to these basic principles for both Tokens and Coins.