From Coin to Token: A Complete Guide to Cryptocurrency Asset Classification

In the early days of the cryptocurrency market, the term “Coin” was primarily used to refer to Bitcoin, Litecoin, Dogecoin, and similar assets. It wasn’t until the advent of Ethereum that the concept of “Token” gradually gained popularity, leading to confusion among many investors about the two. In fact, understanding the Chinese meanings of Coin and Token is crucial for successful crypto asset investment.

Fundamental Difference: Does it Have an Independent Blockchain?

The core difference between Coin and Token lies in their underlying infrastructure.

Coins have their own blockchain and are the native assets of that network. Bitcoin operates on the Bitcoin blockchain, and Ether runs on the Ethereum blockchain; these are the foundational layers of their respective public chains.

Tokens, on the other hand, are entirely different—they do not have their own blockchain but are built on existing public blockchain ecosystems. Since the launch of the ERC-20 standard on Ethereum in 2015, anyone can issue their own Token on it. To this day, Ethereum remains the largest platform for Token issuance worldwide.

Simply put, a Token is a digital asset attached to a public chain, representing specific rights, certificates, or other forms of digitized assets. DeFi tokens, Layer-2 tokens, NFT tokens (such as APE, SAND) all fall under the category of Tokens.

What are the Classifications of Tokens? Different Functions

According to the classification framework of the Swiss Financial Market Supervisory Authority (FINMA), Tokens can be divided into three categories:

Payment Tokens

Designed specifically for secure, efficient, and low-cost payment functions. Stablecoins are a typical example, maintaining a peg to fiat currency to facilitate payments.

Utility Tokens

Exist as access passes for applications. These Tokens grant holders the right to use a particular application or service. Most ERC-20 tokens on Ethereum belong to this category.

Asset Tokens

Represent rights to a project or asset. Holding an Asset Token means becoming part of that project and enjoying the value appreciation brought by the token. However, it’s important to note that in the crypto ecosystem, these usually do not involve company ownership or dividend rights.

In practice, a Token often exhibits two or even three of these characteristics simultaneously, so classification is not always strictly exclusive.

Investment Perspective Comparison Table

Token vs Coin: Which Has Greater Investment Value?

There is no absolute answer to this question. Both have their own characteristics and are closely complementary:

Infrastructure vs Application Layer

Coins mainly address the infrastructure issues of public chains, providing the foundational support; Tokens are developed on this foundation to create various applications and services, directly meeting user needs. Both are indispensable.

Scalability

Tokens often have greater application expansion potential. When Coins fail (e.g., QTUM, BTM), there are usually no alternatives. Tokens can continuously introduce new services, such as MakerDAO’s RWA business.

Volatility and Opportunities

Token prices tend to be more volatile than Coins. The price swings of UNI, SNX, MKR are often larger than BTC and ETH, especially during bull markets. This creates more opportunities for short-term traders but also increases risks.

How to Trade Tokens? Two Main Methods

Method 1: Spot Trading

Spot trading involves actual assets, with full payment. For example, if the current price of UNI is $3, the buyer pays $3 to obtain 1 UNI with full ownership.

Important Tip: Beware of fake tokens. Some teams issue tokens with the same name as well-known projects, but they are worthless or cannot be listed on exchanges. To prevent this, verify the contract address—check the official contract information on a blockchain explorer.

Method 2: Margin Trading

Margin trading uses leverage, allowing control of larger positions with only a portion of the capital. For example, using 10x leverage to go long on UNI, which is priced at $3, you only need $0.3 to open a position.

Key Point: Margin trading usually does not involve actual tokens, so there is no risk of fake tokens. However, leverage amplifies both gains and losses.

Trading Risk Tips

It is a fact that Token volatility exceeds that of Coins. While this offers investment opportunities, it also entails liquidation risks. Recommendations:

• Control leverage ratios, ideally not exceeding 10x
• Strictly manage position sizes
• Monitor abnormal fluctuations of newly issued Tokens
• Choose regulated, secure, and reliable trading platforms

Whether engaging in spot or margin trading, safety should take precedence over returns. A platform certified by authoritative institutions with robust risk control mechanisms is the first step toward investing in Tokens.