Coin Vs Token: Basic to PhD Definitions — State-Level Explanation
● Basic Definition
• Coin:
Cryptocurrency that has its own blockchain is called a coin.
It is primarily used for the following purposes :
I. A medium of exchange
II. A store of value
III. To pay network fees
IV. Staking/Rewards: To incentivize users to participate in securing the blockchain & maintaining the network’s integrity.
• Token:
Cryptocurrency that relies on another blockchain is called a Token.
It is primarily used for the following purposes:
I. Utility: To access products or services within a specific project or ecosystem.
II. Governance: To vote on project decisions or protocol upgrades.
III. Representation of Value: To represent assets like stablecoins, NFTs, or other real-world or digital items.
IV. Staking/Rewards: To incentivize users to support a protocol or ecosystem & participate in governance or network activities.
eg. LINK, ARB, OP, zkSync, STRK, etc
● Confusion:
If coins have their own blockchains, then:
• Why are ARB, OP, zkSync, STRK considered tokens even though they have their own chains?
• Why are HBAR and IOTA considered coins when they don’t even use traditional blockchain technology?
This confusion exists because the basic definition used by the masses is incomplete & technically inaccurate.
[First understand this, ARB, zkSync, OP, STRK, are tokens, not coins because even though they have their own blockchains/Protocols, their security & settlement ultimately rely on Ethereum’s protocol. They are Layer-2 scaling solutions, their chains handle fast transactions, but Ethereum guarantees final settlement & security].
● Coin Vs Token: PhD Definition
• Coin
A virtual asset that relies on its own protocol for security and settlement is called a coin.
eg. Bitcoin, XMR, Ether, SOL, HBAR, IOTA, XRP, BNB, etc
• Token
A virtual asset that relies on another protocol for security and settlement is called a token.