Understanding the Difference: Crypto Tokens vs Coins

Crypto trading is no longer a niche interest, but a global phenomenon that has captured the attention of individuals and institutions alike. However, the crypto terminology can often be confusing for those who are new to the space or even for those who have been in it for a while. One common point of confusion is the difference between crypto tokens and crypto coins. In this blog post, we will delve into these two terms, their key differences, and their respective roles in the crypto world.

What is a Crypto Coin?

At the most basic level, a crypto coin is a digital or virtual form of currency. They are designed to act as a medium of exchange, store of value, and unit of account. They operate on their own independent blockchain. Examples of crypto coins include Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTN).

According to the Bitcoin website, Bitcoin is a “consensus network that enables a new payment system and a completely digital money.” Similarly, Ethereum’s official website defines Ethereum as a “technology that’s home to digital money, global payments, and applications.”

What is a Crypto Token?

On the other hand, crypto tokens represent a specific utility or asset, or both, and reside on an existing blockchain. They are often used to raise funds for crowd sales, but they can also be used as a substitute for other things. These tokens are often issued through an Initial Coin Offering (ICO) or through a Token Generation Event (TGE).

For example, the Basic Attention Token (BAT) is a utility token that can be exchanged between publishers, advertisers, and users on the Brave browser platform. According to the official BAT website, “The token can be used to obtain a variety of advertising and attention-based services on the BAT platform.”

Key Differences Between Crypto Tokens and Coins

The main difference between a token and a coin lies in their structure and use.

Structure

Coins have their own blockchains, while tokens operate on an existing blockchain. For example, Bitcoin operates on the Bitcoin blockchain, while the Basic Attention Token operates on the Ethereum blockchain.

Use

Coins primarily serve as currency, while tokens represent a company’s assets or utility. For instance, Bitcoin is used as a form of digital money, while BAT tokens are used within the Brave Browser ecosystem.

Practical Examples

Let’s use code snippets to demonstrate how you’d interact with a coin (Ethereum) and a token (BAT) on their respective platforms.

Ethereum (ETH)

To send Ethereum, you would typically use a library like web3.js. Here’s a simple example:

const Web3 = require('web3');
const web3 = new Web3('https://mainnet.infura.io/v3/YOUR-PROJECT-ID');

const account1 = '0xACCOUNT1'; 
const account2 = '0xACCOUNT2'; 

web3.eth.sendTransaction({
    from: account1,
    to: account2,
    value: web3.utils.toWei('1', 'ether') // Sends 1 Ether
})
.then(function(receipt){
    console.log(receipt);
});

Basic Attention Token (BAT)

Similarly, to interact with the BAT token, you would use the Ethereum blockchain:

const Web3 = require('web3');
const web3 = new Web3('https://mainnet.infura.io/v3/YOUR-PROJECT-ID');

const account1 = '0xACCOUNT1';
const account2 = '0xACCOUNT2';

const batTokenAddress = '0x0D8775F648430679A709E98d2b0Cb6250d2887EF'; // BAT token smart contract address
const batTokenABI = [...] // You can get the ABI from the Ethereum explorer

const batToken = new web3.eth.Contract(batTokenABI, batTokenAddress);

batToken.methods.transfer(account2, '100').send({ from: account1 })
.then(function(receipt){
    console.log(receipt);
});

Conclusion

Understanding the difference between crypto coins and tokens is crucial for anyone involved in crypto trading. While they might seem similar at first glance, they serve different purposes and have different structures. Coins are independent digital currencies with their own blockchains, while tokens operate on existing blockchains and represent assets or utilities. By understanding these differences, traders can make more informed decisions and better understand the exciting and complex world of cryptocurrency.