Crypto Coins vs. Crypto Tokens: What’s the Difference?

Every cryptocurrency, from Bitcoin to Ethereum, Litecoin and more, is built on a blockchain network. A cryptocurrency can be considered either a coin or a token. While there are differences between the two, they are also quite similar in many ways.

The Core Distinction

To put it simply, crypto coins have their own blockchains on which they are built. If a cryptocurrency is built on another crypto’s blockchain, then it is technically a token.

For example, Ethereum is a blockchain with a native cryptocurrency – Ether. Ether is a crypto coin. However, Ethereum is a programmable blockchain network. Developers can launch their own cryptocurrencies on it. These currencies operate on Ethereum’s blockchain, making them crypto tokens. Examples of tokens built on Ethereum include Tether, OmiseGO, Axie Infinity, and many more.

Some blockchain casinos accept niche or bizarre cryptos. You may have heard of the Squid Game token, Squid. It gained traction due to hype around the TV series, but a ‘rug pull’ scam cost investors significant sums. The token crashed. It is widely considered a scam.

Creating a token is easier than creating a coin, so scams are more common with tokens. That does not mean all tokens are bad investments or all coins are good ones.

Key Terminology

What is crypto mining?

Mining confirms new crypto transactions and adds blocks to the blockchain. Miners use specialized hardware to solve complex puzzles. The first miner to solve a puzzle receives cryptocurrency or transaction fees as a reward. Mining can be done individually or in mining pools, where groups combine computational power.

What is crypto staking?

Staking allows you to earn rewards by holding certain cryptocurrencies. Cryptocurrencies using a proof-of-stake mechanism (Bitcoin does not) enable staking. When you stake your crypto, it becomes part of the transaction verification process. Proof-of-work cryptos, like Bitcoin, rely on mining instead.

What is crypto trading?

Crypto trading involves buying and selling cryptocurrencies on exchanges like Binance. You speculate on price changes. To trade, you create an account on a crypto brokerage such as Coinbase, where you exchange fiat money for crypto and store coins until you are ready to trade.

Crypto Tokens

Tokens’ main advantage is being created on an existing blockchain. Developers can create tokens without building a new blockchain. The process is faster, easier, and less expensive. Transactions with a token occur on the blockchain it operates on.

A crypto token is an asset with value. Tokens rely on smart contracts. They can be bought, sold, traded, and stored in e-wallets.

Popular tokens include Tether, Uniswap, Chainlink, Dai, BAT, and AAVE.

Some tokens are stablecoins, aiming to match the value of a fiat currency. Tether, for example, tries to equal one USD. Stablecoins appeal to those wanting to avoid crypto volatility.

There are several types of digital tokens:

• Platform Tokens: Built on another crypto’s blockchain, operating on that platform. Examples include the tokens listed above (built on Ethereum).
• Utility Tokens: Used to pay for services within a specific ecosystem. Binance Coin is a utility token for paying fees on Binance exchange.
• Governance Tokens: Grant holders voting rights on projects concerning a cryptocurrency’s future. More tokens grant more power. Maker (MKR) is an example.
• Transactional Tokens: Exchanged for goods and services, often functioning as regular currencies. Dai and Tether are examples.
• Security Tokens: Represent ownership of shares in a blockchain company, offered as an investment. Blockchain Capital (Bcap) is an example.

Other Use Cases for Crypto Tokens

Some tokens fall into the above categories while having unique features. One popular use is NFTs (non-fungible tokens), which show ownership of a digital asset. NFTs have existed since roughly 2014 but gained popularity recently. The first NFT sold for $1.47 million.

Blockchain casinos sometimes create their own tokens for gambling. Kineko has the Kineko Token (KKO). BC.Game has BC Dollar. Trust Dice has TXT, a utility token.

Even ‘meme coins’ exist, such as Shiba Inu and Dogecoin.

Crypto Coins

Developers creating a crypto coin must first build a blockchain. This is a challenging task. A good blockchain must be safe, resistant to hacker attacks, and able to process transactions quickly at low costs. Building a blockchain also requires validators to confirm transactions, making the process long and complex.

Popular crypto coins include Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Ripple, NEO, Cardano, and Monero.

Crypto coins function as money – a medium of exchange, a currency. But they have other uses beyond casino deposits. The Ethereum network uses Ether to fuel transactions. Even sending tokens built on Ethereum requires Ether. The NEO network uses GAS for transaction fees. Holding DASH allows voting on decisions within the Dash network.

As you can see, the difference between crypto coins and crypto tokens is subtle but not irrelevant. Understanding this distinction helps you choose which cryptos to use for gambling or other purposes.