What is the difference between a coin and token?

What is the difference between a coin and a token?

There are no “official” crypto-economy definitions, but we propose:

  • Coins derive their value from the blockchain, can operate independently and are utilised to secure the network by incentivising miners and stakers.
  • Tokens are built on top of an existing blockchain and are not involved in the process of reaching consensus.

Therefore a token is built on top of a coin.

Coin

Native coins and their blockchain have no value independently as both are inseparable.

The blockchain’s core function is to track and record transactions of native coins between peers. Furthermore, miners and stakers earn transaction fees and mining rewards in native coins.

Therefore, the blockchain would not exist without its native coin and vice versa.

Examples of native coins: Bitcoin, Litecoin, Ether, Monero.

Token

Tokens are not built on their own blockchain.

At first, developers had to create new blockchains for new projects, a process that required a broad array of skills including cryptography, advanced computer science, game theory, mathematics and more.

Rather than building everything from scratch, developers are provided with a safe environment for tokens to be deployed and mature.

Examples of blockchain platforms: Ethereum, Neo, Waves, Omni
Examples of secondary tokens: Gnosis, Bancor