Coins and tokens are often confused in the crypto world, but recognizing their differences is essential for navigating the space. Coins, like Bitcoin (BTC) or Ethereum (ETH), run on their own blockchains and serve as mediums of exchange, stores of value, or utilities for blockchain operations. Tokens, however, are created through smart contracts on existing blockchains and are used within specific decentralized applications (dApps) or ecosystems.

Example: The TON Network

An example is the Telegram Open Network (TON), which has its own blockchain and native $TON Coins. Many apps and services within the TON ecosystem use tokens built on the TON blockchain, like $NOT or $DOGS. This demonstrates the versatility of tokens, which can represent assets, governance rights, or services.

Practical Uses of Coins

Coins typically have broader functions within their respective networks. For instance, Bitcoin is used for digital transactions and as a store of value, while Binance Coin (BNB) powers the Binance Smart Chain. Originally a token on Ethereum, BNB transitioned to its own blockchain, becoming a native coin.

Importance of the Difference for Investors

Understanding whether a cryptocurrency is a coin or a token affects how you evaluate its value. Coins derive intrinsic value from their blockchains, whereas tokens get their value from the applications they support. For example, Chainlink (LINK) is a token on the Ethereum network that provides value by enabling smart contracts in decentralized finance (DeFi).

Conclusion

The distinction between coins and tokens is subtle but crucial for anyone investing in cryptocurrencies. Coins are standalone and native to their blockchains, while tokens are versatile assets built on top of blockchains, playing specific roles within dApps or ecosystems. Understanding this difference helps make informed investment choices in the crypto space.