Coin or Token? An article breaking down the ultimate comparison of crypto assets

The “Naming Chaos” in the Crypto World

When it comes to Crypto, most people think of old faces like Bitcoin, Litecoin, Dogecoin. Back then, it was all “Coin,” and no one got confused. But since Ethereum burst onto the scene, Coin and Token have started to “blend together,” and their Chinese translations are both called 代幣 or 加密貨幣, resulting in — even many investors can’t tell which is which.

Today, let’s clarify what exactly is the difference between these two.

What is a Token?

The essence of a Token is a digital asset built on an existing blockchain, representing specific rights, certificates, or value. In simple terms, they don’t have their own dedicated public chain but are parasitic within other blockchain ecosystems.

Imagine the concept of a bank token — a bank’s token is used for identity verification and transaction authorization. Crypto Tokens follow the same logic, but they represent a broader range of value and rights. After Ethereum launched the ERC-20 token standard in 2015, anyone could easily issue their own Token on it. To this day, Ethereum remains the public chain with the largest volume of Token issuance, bar none.

So, Token is a general term, not the name of a specific coin. DeFi tokens, Layer-2 project tokens, NFT tokens (like APE, SAND), all belong to the Token camp.

The Three Main Types of Tokens, Each Serving Its Purpose

The Swiss Financial Market Supervisory Authority (FINMA) classifies Tokens into three categories:

Payment Tokens
The purpose is straightforward — to enable secure, efficient, low-cost payments. Stablecoins are typical representatives.

Utility Tokens
Provide access to various applications. Most ERC-20 tokens on Ethereum fall into this category. Holding them is like having a key to enter a certain application ecosystem.

Asset Tokens
Allow holders to become part of a project, sharing in the asset or project’s value growth. To some extent, like stocks, but it’s important to note that tokens in the crypto space usually do not involve ownership rights or dividends.

In reality, it’s hard to give Tokens a complete classification because a single Token often possesses two or even three of these attributes simultaneously. This is also why the concept of Token can be somewhat complex.

The Fundamental Difference Between Coin and Token

Coins have their own dedicated blockchain and are the native assets of that network. Bitcoin (BTC) runs on the Bitcoin blockchain, Ether (ETH) runs on the Ethereum blockchain — they are the network’s “children.”

Tokens do not have their own blockchain but are built on existing blockchain ecosystems. This results in Token ecosystems generally being less extensive than Coins, and sometimes unable to support complex applications independently.

Here’s a comparison table for clarity:

Investing in Tokens vs. Coins: Which is More Attractive?

Actually, it’s not a matter of choosing one over the other; they are closely linked and each has its advantages.

Think of Coins as the infrastructure of the public chain, and Tokens as the application layer. The former solves underlying problems, while the latter creates various applications and services on top. Both are indispensable, but their roles differ.

The advantage of Tokens lies in their flexibility. They offer greater imagination space for applications and services, and are relatively easier to implement. If a Coin fails, it’s hard to turn things around — for example, stars like Qtum or BTM, if their infrastructure isn’t solid, they end up with no future. Tokens are different; if one service doesn’t work out, you can push a new one. MakerDAO’s RWA business is an example.

However, Tokens tend to be more volatile than Coins. Tokens like UNI, SNX, MKR often have price swings exceeding BTC and ETH, especially in bull markets. This presents opportunities for short-term investors but also entails higher risks.

How to Invest in Tokens? Two Approaches

Method 1: Spot Trading

Spot trading involves actual buying and selling of tokens. For example, if UNI is now $3, buying 1 costs $3, and you immediately own 1 Token and its rights. Simple and straightforward.

But beware of a pitfall — fake tokens with the same name. A team develops a valuable ABC token, but another unscrupulous team issues a counterfeit ABC token with the same name, worth nothing and not listed on exchanges. Once bought, it might be impossible to sell.

The key to avoiding scams is: verify the contract address on the official website or blockchain explorer. Etherscan for Ethereum is a good example.

Method 2: Margin Trading

This method doesn’t require holding actual Tokens; instead, you use part of your funds as collateral to control larger positions — this is leverage trading.

For example, using 10x leverage to go long on UNI at $3, you only need $0.3 to control one UNI position. If it’s a CFD or U-based contract, you won’t actually hold the UNI.

Always control your risk. Token volatility is high, so don’t leverage over 10x. A 10% daily fluctuation in BTC is becoming rare, but many new Tokens fluctuate that much daily, and liquidation risks are real.

Choosing the Right Trading Platform Is Crucial

Whether spot or margin trading, the operation process is similar. The most important thing is — be sure to choose a safe, reliable platform regulated by authoritative institutions. This is a fundamental consideration when investing in Tokens; never cut corners.

On legitimate platforms, your funds are safer, and trading is more regulated. In contrast, some small or illegal platforms can lead to total loss of funds with a single mistake.

Summary

Although Tokens and Coins are both crypto assets, they are fundamentally different paths. Coins are the infrastructure, Tokens are the application innovation. When investing, there’s no need to choose one over the other; you can flexibly allocate based on your risk tolerance and strategy. As long as you select the right platform and manage risks properly, Token investment can be a profitable path.