The difference between a cryptocurrency coin and a token lies primarily in their functionality, the underlying blockchain infrastructure, and how they are used. Here’s a breakdown:

1. Blockchain Infrastructure

• Coin:

  • Operates on its own native blockchain.
  • Examples include Bitcoin (BTC) on the Bitcoin blockchain and Ether (ETH) on the Ethereum blockchain.
  • Coins are typically used for transactions, value storage, or as a digital currency.

• Token:

  • Created on an existing blockchain, leveraging the infrastructure of a parent blockchain.
  • Most tokens are built on Ethereum, using standards like ERC-20 or ERC-721.
  • Other blockchains like Binance Smart Chain, Solana, and Cardano also support token creation.

2. Purpose and Use Case

• Coin:

  • Functions as money or a digital currency.
  • Used for:
    • Transferring value (e.g., payments).
    • Storing value (similar to digital gold).
    • Powering their respective blockchain (e.g., paying gas fees on Ethereum).
  • Examples:
    • Bitcoin: Digital currency.
    • Ether: Powers Ethereum smart contracts and pays gas fees.

• Token:

  • Often represents assets or has specific utility within a decentralized application (DApp).
  • Can serve various purposes:
    • Governance tokens: Grant voting rights (e.g., UNI for Uniswap).
    • Utility tokens: Used within a platform (e.g., LINK for Chainlink).
    • Security tokens: Represent investment assets.
    • Non-fungible tokens (NFTs): Represent unique items or rights.
  • Examples:
    • USDT (Tether): A stablecoin on Ethereum.
    • AAVE: A governance and utility token for the AAVE protocol.
    • NFTs: Unique digital collectibles.

3. Technology

• Coin:

  • Directly tied to its blockchain and integral to its operation.
  • Example: Bitcoin mining secures the Bitcoin network and rewards miners with BTC.

• Token:

  • Created using smart contracts on a blockchain.
  • Example: A company could issue a token for fundraising through an Initial Coin Offering (ICO) on Ethereum.

4. Interoperability

• Coin:

  • Limited to the blockchain it belongs to unless bridges or interoperability solutions are used.
  • Example: Bitcoin operates on the Bitcoin blockchain.

• Token:

  • Easily created and deployed on compatible blockchains.
  • Example: ERC-20 tokens can interact with other Ethereum-based projects and applications.

Summary Table

In essence, coins are the backbone of a blockchain, while tokens are more versatile, representing assets, rights, or services on a pre-existing blockchain.