Cryptocurrency terminology has evolved significantly since the early days of Bitcoin. Initially, the term coin dominated discussions—Bitcoin, Litecoin, Dogecoin—all referred to native assets of their own blockchains. The word token was rarely used, so confusion between the two didn’t exist.
But with the rise of Ethereum and smart contract platforms, the landscape changed. Now, both coins and tokens circulate widely, often translated interchangeably as “digital currency” or “cryptocurrency” in Chinese, leading to widespread misunderstanding among investors.
In this guide, we’ll clarify what a token is, explore its types, explain how it differs from a coin, and walk through practical steps for trading tokens—all while helping you make informed decisions in the fast-moving world of digital assets.
What Is a Token?
A token—often translated as "digital asset," "utility token," or simply "cryptotoken"—is a digital representation of value or rights built on top of an existing blockchain. Unlike coins, tokens do not have their own native blockchain. Instead, they are issued using smart contracts on established networks like Ethereum, Binance Smart Chain, or Solana.
The launch of Ethereum’s ERC-20 standard in 2015 revolutionized token creation, allowing developers to easily deploy custom tokens without building a new blockchain from scratch. Today, Ethereum remains the most popular platform for token issuance, hosting thousands of projects ranging from DeFi protocols to NFT collections.
Tokens are not standalone currencies like Bitcoin; rather, they serve as access keys, governance instruments, or value carriers within specific ecosystems. Examples include:
- UNI: Governance token for Uniswap
- APE: Utility and governance token for the Bored Ape Yacht Club
- USDT: A stablecoin operating as a token on multiple chains
👉 Discover how easy it is to start trading major tokens today.
Token vs Coin: Key Differences
While often used interchangeably, tokens and coins differ fundamentally in structure and function.
| Feature | Coin | Token |
|---|---|---|
| Blockchain Ownership | Has its own native blockchain (e.g., BTC on Bitcoin, ETH on Ethereum) | Built on top of another blockchain (e.g., USDC on Ethereum) |
| Primary Purpose | Acts as digital money or store of value | Represents utility, governance, or asset ownership within an app |
| Consensus Mechanism | Secured by its own network (PoW, PoS, etc.) | Inherits security from host blockchain |
| Use Case Flexibility | Limited to monetary functions | Highly versatile—can represent shares, rewards, NFTs, or voting power |
In short:
A coin powers a blockchain. A token powers an application.
Coins like Bitcoin and Ethereum form the foundation—the “infrastructure layer”—of the crypto economy. Tokens, by contrast, operate at the application layer, enabling decentralized finance (DeFi), gaming (GameFi), social platforms, and more.
Types of Tokens
According to Switzerland’s Financial Market Supervisory Authority (FINMA), tokens can be classified into three main categories:
1. Payment Tokens
These are designed primarily for transactions and value transfer. While some payment tokens are native coins (like BTC), many stablecoins such as USDT, USDC, and DAI function as payment tokens issued as ERC-20 tokens on Ethereum.
They offer faster settlements and lower fees than traditional banking systems, making them ideal for cross-border payments and everyday use in crypto economies.
2. Utility Tokens
Utility tokens grant access to a product or service within a decentralized application (dApp). For example:
- UNI allows users to participate in Uniswap governance
- SAND enables users to buy virtual land in The Sandbox metaverse
These tokens incentivize user engagement and platform growth but typically don’t confer legal ownership.
3. Asset Tokens
Also known as security tokens, these represent ownership in an external asset or project—similar to stocks or bonds. Holding an asset token may entitle you to dividends, profit-sharing, or equity-like benefits.
However, most crypto asset tokens do not provide actual corporate ownership or regulatory protections. Always research whether a token complies with securities laws before investing.
💡 Note: Many real-world tokens blend features across categories. For instance, DAI serves as both a payment and utility token.
Why Invest in Tokens?
Choosing between coins and tokens isn’t about which is better—it's about understanding their roles.
- Coins secure networks and enable basic transactions.
- Tokens drive innovation by powering decentralized applications that solve real-world problems.
Here’s why tokens attract investors:
🔹 Greater Innovation & Use Cases
Tokens thrive in dynamic environments like DeFi, NFTs, and Layer-2 scaling solutions. Their flexibility allows rapid experimentation—new features can be launched without rebuilding the entire system.
For example, MakerDAO expanded from lending to real-world asset (RWA) tokenization with minimal disruption.
🔹 Higher Volatility = More Opportunities
Tokens often experience sharper price swings than major coins. During bull markets, tokens like UNI, SNX, or MKR can outperform BTC and ETH significantly.
👉 Learn how volatility can create strategic trading opportunities with precision tools.
While high volatility increases risk, it also opens doors for short-term traders and yield seekers.
How to Trade Tokens
There are two primary ways to gain exposure to tokens:
Method 1: Spot Trading
In spot trading, you buy and own the actual token. If UNI trades at $3, paying $3 gets you one UNI stored in your wallet.
✅ Pros:
- Full ownership
- Can stake or use in dApps
⚠️ Risks:
- Risk of fake/scam tokens with identical names
- Must verify contract addresses via official websites or block explorers like Etherscan
Always double-check the token’s contract address before purchasing—scammers frequently create fake versions of popular tokens.
Method 2: Margin & Derivatives Trading
This includes CFDs (Contracts for Difference) or futures where you speculate on price movements without owning the underlying asset.
For example:
- Use 10x leverage to open a $30 position in UNI with just $3
- No need to manage wallets or private keys
While convenient, leveraged trading carries high risk. A sudden 10% drop could liquidate your position if over-leveraged. Stick to conservative leverage (e.g., ≤10x), especially with volatile alt-tokens.
How to Start Trading Tokens: Step-by-Step
- Choose a Secure Platform
Pick a regulated exchange offering spot and derivatives trading. - Search for Your Token
Enter the symbol (e.g., “UNI”) in the search bar. - Set Parameters
Choose trade type (buy/sell), amount, leverage (if applicable), and stop-loss/take-profit levels. - Execute the Trade
Confirm and place your order.
👉 Get started with advanced trading features designed for both beginners and pros.
Notable Tokens Worth Watching
UNI (Uniswap)
As the governance token of the largest decentralized exchange, UNI saw its price fall from $45 in 2022 to below $3. It has since stabilized between $3–$9, suggesting a potential long-term bottom forming. A breakout above $9 could signal renewed bullish momentum.
MATIC (Polygon)
Polygon’s MATIC powers a leading Layer-2 scaling solution for Ethereum. Despite sharp corrections in 2021–2022, it rebounded strongly—showing resilience and strong upside potential during market recoveries.
APE (ApeCoin)
Tied to the Bored Ape NFT ecosystem, APE peaked at $32 in 2022 before crashing to around $1. With no significant recovery yet, it remains a candidate for a future oversold bounce.
Frequently Asked Questions (FAQ)
Q: Are tokens safe to invest in?
A: Security depends on the underlying blockchain and project team. Tokens on well-audited networks like Ethereum benefit from strong infrastructure security. However, risks like contract bugs, rug pulls, or team mismanagement remain common—especially with new or unaudited projects.
Q: Can anyone create a token?
A: Yes—thanks to open standards like ERC-20. But creating a valuable token requires more than code: trust, utility, community, and transparency matter most.
Q: Do tokens pay dividends?
A: Most don’t. Some protocols distribute rewards via staking or fee-sharing mechanisms (e.g., COMP interest), but these aren’t guaranteed dividends like stocks.
Q: Is every token a cryptocurrency?
A: All tokens are digital assets within crypto ecosystems, but not all serve as currencies. Many represent access rights, voting power, or collectibles (like NFTs).
Q: Can a token become a coin?
A: Yes—some projects start as tokens (e.g., BNB on Ethereum) and later migrate to their own blockchain (Binance Chain), becoming coins.
Disclaimer: This article does not constitute financial advice. Cryptocurrencies are highly volatile and risky investments. Always conduct independent research and consult with a licensed financial advisor before making investment decisions.