Coin vs Token: What´s the difference?

In cryptocurrency, some people often use “coin” and “token” as if they mean the same thing, but they are different. Each has its own purpose and function. Understanding this difference helps you use and invest in crypto more wisely.

Let´s see more deeply about this difference.

Coin vs Token

Coins are digital assets that have their own blockchain and play a fundamental role within these networks. They function similarly to traditional money, being used for transactions, storage and, in some cases, they are even used to execute functions within the network, facilitating transactions and potentially supporting smart contract operations, such as Bitcoin and Ethereum.

Coins are tied to blockchains that use consensus mechanisms like 

• Proof of Work (PoW) – Miners solve puzzles to validate transactions (e.g., Bitcoin).
• Proof of Stake (PoS) – Validators stake coins to secure the network (e.g., Ethereum 2.0).
• Delegated Proof of Stake (DPoS) – Token holders vote for a few validators (e.g., EOS).
• Proof of Authority (PoA)  – Pre-approved validators confirm transactions (used in private chains).

Example: Bitcoin operates on a PoW consensus mechanism, requiring miners to solve cryptographic puzzles using computational power, while Ethereum has transitioned to a PoS model where validators stake ETH to propose and finalize blocks.

Tokens, in contrast, are digital assets created on existing blockchain platforms, most commonly on Ethereum. Unlike coins, tokens do not have their own blockchain; instead, they rely on the infrastructure of another blockchain to operate. Tokens can represent a variety of assets or utilities, such as access to specific services, voting rights within a decentralized application (dApp), or even physical assets. Their versatility allows developers to implement a wide range of functionalities without building a new blockchain from scratch.

Example: ERC-20 is the most widely adopted fungible token standard on Ethereum, defining a set of functions such as transfer, approve, and allowance. That enables  interaction with decentralized applications and wallets. In contrast, ERC-721 is a non-fungible token standard, primarily used for digital collectibles and gaming assets, featuring a unique tokenId to ensure each token is distinct.

Coins vs Tokens Comparison

Key Differences Between Tokens and Coins

The primary distinction between coins and tokens lies in their structural foundation and intended use.

• Coins function as the native unit of account and economic incentive layer within their respective consensus protocols. They serve as:
  • Medium of Exchange: Coins function as a digital alternative to fiat currencies, allowing seamless peer-to-peer (P2P) transactions without intermediaries..
  • Store of Value: A key property of sound money is its ability to retain purchasing power over long periods.
  • Unit of Account: For any asset to be widely adopted as a currency, it must function as a reliable unit of account, a standardized method for valuing goods, services, and financial instruments..
• Tokens, however, leverage the computational logic of smart contract platforms, utilizing standards such as ERC-20, BEP-20, or SPL for fungible assets and ERC-721, ERC-1155 for non-fungible representations. Their functionalities extend beyond those of coins, including:
  • Access Rights: Granting holders the ability to use a particular service or platform.
  • Governance: Allowing holders to participate in decision-making processes within a blockchain project, such as Klever Finance Token (KFI) .
  • Asset Representation: Symbolizing ownership of assets, such as real estate or stocks, in a digital form.

Use Cases and Examples of Coin and Tokens

Understanding the practical applications of coins and tokens highlights their roles within the cryptocurrency ecosystem.

• Coins
  • Bitcoin (BTC): Designed as a decentralized digital currency, Bitcoin enables peer-to-peer transactions without intermediaries. It’s often referred to as “digital gold” due to its store of value properties.
  • Ethereum (ETH): While Ether serves as a digital currency, it also powers the Ethereum network, facilitating transactions and computational operations for dApps and smart contracts.
• Tokens
  • Uniswap (UNI): A governance token for the Uniswap decentralized exchange, allowing holders to vote on protocol changes and development decisions.
  • Chainlink (LINK): Operates on the Ethereum blockchain, providing real-world data to smart contracts. LINK tokens are used to pay for services within the Chainlink network.
  • Tether (USDT): A stablecoin token pegged to the US dollar, used for trading and as a stable store of value within the crypto market.
  • Klever Finance Token (KFI): The governance token of KleverChain, enabling holders to vote on protocol upgrades and manage network decisions.

Use Klever Wallet to Secure Your Assets

Klever Wallet offers a secure, user-friendly solution for managing tokens and coins. Supporting over 10,000 assets across 40+ blockchains, it enables seamless transactions, staking, swapping and asset storage.

• Security: Uses strong encryption, private key control and both hot and cold storage options.
• Accessibility: Available as a mobile app and browser extension.
• Ease of Use: Simple interface for storing, swapping, and tracking crypto assets.

Download Klever Wallet app and start securing your assets safely now!