All crypto assets can accumulate, lose and trade in value. But they fall into different categories, including their uses, limitations, and origins. When it comes to crypto, there are two main categories an asset can fall into: Coins and tokens.
It was presented in coin form in 2009 when Bitcoin (BTC) was developed by the mysterious Satoshi Nakamoto. This was because Bitcoin had a unique blockchain designed specifically for BTC transactions. Although side coins like Bitcoin Cash and Bitcoin Gold have been produced today, BTC is the only coin on the Bitcoin blockchain.
That is, a cryptocurrency always has a designated blockchain that it does not share with any other type of asset. This is why coins are often described as “native” because they exist as the primary currency of a blockchain. For this reason, it usually takes much more time to develop a coin.
Coins are generally only used as a store of value. While this is not always the case, it is common for a coin to be used as an investment, as they generally do not tend to provide benefits within a network. It can also be “mined” for coins and use a number of different consensus mechanisms such as proof-of-work (PoW) and proof-of-stake (PoS).
Solana (SOL), Binance Coin (BNB) and Algorand (ALGO) are among other examples of cryptocurrencies.
A crypto token is a digital asset built on a pre-existing blockchain. Thus, it is not specific to a blockchain, but may be specific to a particular decentralized project or application (also known as a DApp). The Ethereum blockchain is often used to create tokens, but there are other options. While the Ethereum blockchain has its own native coin, Ether (ETH), it also supports numerous other tokens that have utility in an ecosystem.
Basic Attention Token (BAT) can be provided as an example for this.
BAT was developed on the Ethereum blockchain to monitor user habits and behavior in the Brave browser. Brave hosts its own proprietary advertising platform, where the currency used for advertising comes as BAT. Users can also earn BAT by watching ads. Although BAT can be cashed out via a decentralized exchange, it provides a clear benefit for the Brave browser and ad ecosystem. This is often the case when it comes to tokens, as they are created for use in a decentralized application or service.
Other examples of crypto tokens include Shiba Inu (SHIB), Chainlink (LINK), Cronos (CRO), and Uniswap (UNI).
While Ether itself is a coin and not a token, it is not an asset that exists solely as a store of value. For example, ether can be used to pay transaction fees and purchase Ethereum-based tokens and services on its own blockchain. Therefore, coins can sometimes have additional utility depending on how blockchains can be used.
Tokens can migrate to their own blockchain and become tokens, but this is not a very common process due to the amount of effort required previously mentioned. Many decentralized project developers benefit from the added security and convenience of using well-known, more reliable, pre-existing blockchains such as Ethereum or Zilliqa.
The different origins of coins and tokens describe their nature and utility. In recent years, while tokens have become popular and valuable thanks to the success of decentralized projects, coins continue to be seen as a solid investment option. Both asset types have their own characteristics, and which type you invest in depends entirely on what you want to do with your crypto.
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