What is a Coin? What is a Token?

What is a Coin?

The term "Coin" in cryptocurrency refers to the currency that is native to its own blockchain. They are used as a medium of exchange or a store of value.

Coins have the following characteristics:

• They are mined, in proof-of-work blockchains, like Bitcoin or Dogecoin. The newly generated coins are then given out to the miners.
• In proof-of-stake networks, like Ethereum or Solana, they are staked to validate transactions in the network. The validators get block rewards in the form of new coins.
• Generally used as fees for submitting transactions on their respective blockchains.
• Proof-of-stake networks also use them for maintaining network operations, making governance decisions, or voting on protocol changes.

What is a Token?

Tokens resides on top of existing blockchains. They represent a variety of assets or utilities, and are often created and distributed via tokens sales or Initial Coin Offerings (ICOs).

Tokens have the following characteristics:

• They use the existing infrastructure of another blockchain, like Ethereum, which supports the creation and transfer of tokens through its ERC-20 token standard.
• They can represent a wide range of assets, from physical objects like real estate or gold to digital assets like virtual land and game assets.
• They are usually given a specific utility that can be used as a means of creating a digital economy, DeFi rewards, or facilitating transactions within ecosystems.

Some examples are:

• Tether (USDT), a stablecoin pegged to the US Dollar.
• Chainlink (LINK), an Ethereum-based token that powers the Chainlink decentralized Oracle network.
• Uniswap (UNI), the governance token of Uniswap which is a decentralized exchange.