## Understand the Core Difference Between Token and Coin in One Article and Unravel the Confusion in Investors' Minds

Many newcomers to the crypto space often find themselves confused by the concepts of Token and Coin. In fact, this confusion is not unfounded—early cryptocurrencies mainly used the term Coin (such as Bitcoin, Litecoin, Dogecoin). It wasn't until Ethereum appeared that Tokens started to emerge in large numbers. In Chinese, both are translated as "代幣" or "加密貨幣," which further deepens people's confusion.

## What Exactly Is a Token?

**A Token is essentially a digital asset representation that can be traded, transferred, and exchanged on a blockchain.** In Chinese, it is often translated as "通行證," "令牌," or "代幣," representing specific rights or credentials.

The biggest feature of Tokens is **they do not have their own dedicated blockchain**. After Ethereum launched the ERC-20 token standard in 2015, anyone could issue Tokens on it, which is why Ethereum remains the blockchain with the largest Token issuance to date. Simply put, Tokens can be understood as a collective term for non-blockchain native tokens, including DeFi, Layer-2, NFT tokens (such as APE, SAND), and other forms.

## The Three Main Types of Tokens and Their Uses

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

**Payment Tokens**: Designed to facilitate secure, efficient, and low-cost transactions; stablecoins are a typical example.

**Utility Tokens**: Provide access to applications, mainly existing as ERC-20 tokens on Ethereum.

**Asset Tokens**: Represent ownership rights to projects or assets, similar to stocks, allowing holders to enjoy value appreciation. Note that in the crypto world, asset tokens generally do not involve company ownership or dividend rights.

In practice, a Token often possesses two or even three of these attributes simultaneously, so classification is not absolute.

## The Fundamental Difference Between Token and Coin

| Comparison Item | Token | Coin |
|-------------------|--------|--------|
| Has its own blockchain | No | Yes |
| Blockchain layer | Layer-2, Layer-3 | Layer-1 |
| Common examples | MATIC, SAND, COMP, LINK, UNI, MKR, AAVE | BTC, LTC, ETH, SOL, DOT, ADA, XRP, FIL |
| Issuance method | ICO, IDO, IEO, etc. | Mining |
| Main functions | Payments, staking, voting | Payments, staking |

**The core difference is: Coins have their own blockchain, while Tokens are built on existing blockchain ecosystems.** Bitcoin (BTC) runs on the Bitcoin blockchain, and Ether (ETH) runs on Ethereum; these are the native assets of their respective networks. In contrast, Tokens are constructed on existing blockchain systems, which often results in a narrower ecosystem application compared to Coins, and sometimes they cannot even be used to build independent applications.

## Should You Invest in Tokens or Coins? Both Have Their Merits

If we consider Coins as blockchain-native cryptocurrencies, Tokens can be seen as application-layer cryptocurrencies. Coins mainly solve infrastructure issues, while Tokens build on that foundation to provide various applications or services—both are indispensable.

**Compared to Coins, Tokens have greater application and service scalability.** The value of Coins is often limited to infrastructure optimization; if they fail, there is no fallback (e.g., QTUM, BTM). Tokens, on the other hand, can flexibly launch different services or products. For example, MakerDAO's RWA business demonstrates this advantage.

**It is worth noting that Tokens tend to be more volatile than Coins.** For instance, during bull markets, the price swings of UNI, SNX, MKR are significantly larger than BTC and ETH. This offers more opportunities for short-term investors but also increases risks.

## How to Trade Tokens? Two Main Methods

### Spot Trading

Spot trading involves actual assets, with full payment. For example, if the current price of UNI is $3, the seller transfers 1 UNI to the buyer, who pays $3 and gains ownership of the Token.

**Be especially cautious of fake tokens.** Some teams may issue tokens with the same name as well-known tokens but with no real value. To prevent this, verify the token's contract address on the official website or blockchain explorer.

### Margin Trading

Margin trading is a non-full payment method where investors only need to deposit a portion of the asset as margin to control a larger position. For example, using 10x leverage to go long on UNI at $3, you only need to spend $0.3 to control 1 UNI position. In derivatives or U-based contracts, investors do not actually hold the native Token.

**Because Tokens are more volatile than Coins, controlling position size and leverage is crucial.** It is recommended not to exceed 10x leverage to avoid liquidation risks. Newly listed Tokens, in particular, should be approached with caution due to their often larger price swings.

Choosing a secure trading platform regulated by authoritative institutions is the first priority for Token investment. Whether spot or margin trading, the basic operation process is similar: search for the Token name, fill in parameters like quantity, leverage, stop-loss, take-profit, and click to place an order.

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## Summary

Tokens and Coins are not opposites but represent two different levels within the crypto ecosystem. Coins are responsible for building infrastructure, while Tokens are built on top of that infrastructure to develop applications. Understanding what Tokens are, how they are classified, and their differences from Coins is fundamental for investors to make informed decisions. Regardless of which you invest in, risk management and platform selection are key factors that cannot be overlooked.