In the world of cryptocurrency, coins and tokens are often confused, but understanding their differences is key to navigating the crypto space. Coins, such as Bitcoin (BTC) or Ethereum (ETH), operate on their own blockchain. They serve as a means of exchange, store of value, or utility for powering blockchain operations. Tokens, on the other hand, are built on existing blockchains through smart contracts and are used for specific decentralized applications (dApps) or ecosystems.

Real-World Example: The TON Network

A good example to illustrate the difference is the Telegram Open Network (TON), which uses its blockchain. While Telegram has introduced $TON Coins, many apps and services within its ecosystem use tokens. These tokens are not independent coins but are instead built on top of the TON blockchain like $NOT $DOGS . This distinction highlights the flexibility of tokens—they can represent assets, governance rights, or even services.

Practical Applications of Coins

Coins typically serve broader functions within their networks. For example, Bitcoin is widely used for digital transactions and as a store of value, while BNB (Binance Coin) powers the Binance Smart Chain. Binance Coin started as a token on the Ethereum blockchain before launching its mainnet, transitioning into a native coin of its own blockchain.

Why the Distinction Matters for Investors

Understanding whether a cryptocurrency is a coin or a token impacts how you assess its value. Coins often have intrinsic value tied to their blockchains, while tokens derive their utility from the applications they are used for. For instance, Chainlink (LINK) is a token that operates within the Ethereum network, providing value by facilitating smart contracts in decentralized finance (DeFi).

Conclusion

The difference between coins and tokens can be subtle but is critical for anyone looking to invest or participate in cryptocurrency ecosystems. Coins are independent and serve as native currencies for their blockchains, while tokens are versatile assets built on top of these blockchains, serving specific roles in various dApps or ecosystems. Understanding this distinction can help in making informed decisions about crpto investments.

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