Level 1: Foundations
Coin vs Token
Understanding the fundamental difference between these often-confused terms.
5 min read
Coin
A cryptocurrency that operates on its own independent blockchain. It's the native currency of that network.
Examples:
Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Cardano (ADA)
Token
A cryptocurrency built on top of an existing blockchain. It uses another network's infrastructure rather than having its own.
Examples:
USDT, USDC, LINK, UNI, SHIB (all on Ethereum)
Simple Analogy
Think of it like operating systems and apps:
- • Coins are like operating systems (Windows, macOS, Android) — they run on their own hardware
- • Tokens are like apps — they run on top of an operating system
- • Just as apps need an OS to function, tokens need a blockchain to exist
- • One blockchain (like Ethereum) can host thousands of different tokens
Key Differences
| Aspect | Coins | Tokens |
|---|---|---|
| Blockchain | Has its own blockchain | Built on existing blockchain |
| Primary Use | Pay transaction fees, store value | Access services, represent assets |
| Creation | Requires building entire network | Created via smart contract |
| Independence | Fully independent | Dependent on host blockchain |
| Examples | BTC, ETH, SOL, ADA | USDT, LINK, UNI, AAVE |
| Complexity to Create | Very difficult | Relatively easy |
Types of Tokens
Utility Tokens
Provide access to a product or service. Example: Filecoin (FIL) for decentralized storage.
Governance Tokens
Give voting rights in protocol decisions. Example: UNI for Uniswap governance.
Stablecoins
Tokens pegged to stable assets like USD. Example: USDC, USDT.
Security Tokens
Represent ownership in real-world assets. Subject to securities regulations.
Real World Example
When you use a token on Ethereum (like swapping USDC for LINK):
- 1. You pay the transaction fee in ETH (the coin)
- 2. The smart contract executes the swap using tokens
- 3. Both tokens exist on Ethereum but are separate from ETH itself
- 4. Without ETH for gas, you can't move your tokens
What Beginners Should Remember
- You always need the native coin to pay transaction fees (gas)
- Tokens can only exist and move on their host blockchain
- The same token (like USDT) can exist on multiple blockchains as different versions
- "Altcoin" typically refers to any coin other than Bitcoin