If you are new to crypto, you may have heard the terms coins and tokens. You might wonder if they are the same? The simple answer is they are not the same or interchangeable.
Coins and tokens both represent a store of value. This is similar to fiat currencies like the United States Dollar. Crypto coins are a form of money, while tokens represent something that can be assigned a price.
Technically all coins are considered tokens but not all tokens are considered coins. Confused? Here are the differences:
A coin is native to a blockchain. For example, ETH is the coin for the Ethereum blockchain.
A coin acts as money. You use coins to purchase goods and services like you would with traditional fiat currency.
Coins can be mined. You can earn more of your existing crypto coins by mining whether through Proof Of Work or Proof of Stake systems.
Any transaction involving coins are handled by the blockchain. Coins do not move around; only account balances change. If you purchase something with ETH coin then the balance in your wallet decreases
Tokens represent an asset.
Unlike coins, tokens do not have a blockchain. Instead, they operate on other crypto coins' blockchains. ETH is the coin for the Ethereum blockchain. Token like Tether, BNT and USDC also operate on the Ethereum network.
Any transaction involving tokens rely on smart contracts.
When a token is spent, it physically moves from one place to another