Difference between Coins & Tokens: Explained Like You are 7

Well, strap in, pal, because we are going on an awesome adventure that will turn you into the coolest crypto whiz at your next get-together (or at least among your crypto pals)!

Difference between Coins & Tokens: Explained Like You are 7

So, you’ve heard about coins and tokens in the crazy crypto universe, but you’re still puzzled about what’s what, huh?

Well, strap in, pal, because we’re going on an awesome adventure that’ll turn you into the coolest crypto whiz at your next get-together (or at least among your crypto pals)!

Trust us, by the time we’re done, you’ll be dishing out crypto fun facts like a champ!

Crypto Coins Explained

Let’s start with coins. Coins are cryptocurrencies that belong to their very own blockchain. That means they’re independent and can’t be used on other chains without a little extra work. Coins are super useful for things like:

  • Medium of exchange
  • Store of value
  • Unit of account

You’ve probably heard of popular coins like Bitcoin, Ethereum, and Dogecoin, right?

Native Coins

Native coins run on their own blockchain, like Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC). They’re the main currency of their network.

Forked Coins

Forked coins come from existing blockchains that split or branch off. Some examples are Bitcoin Cash (BCH), Bitcoin SV (BSV), and Ethereum Classic (ETC).

Wrapped Coins

Wrapped coins represent another asset on a different blockchain. They help with cross-chain functionality and liquidity. Wrapped Bitcoin (WBTC) and Wrapped Ether (WETH) are examples


Stablecoins are pegged to another asset, like fiat currency or gold. They aim to provide price stability and reduce volatility. You might have heard of Tether (USDT) or USD Coin (USDC).

Explained like you’re 7:

Native Coins:

Think about your favorite toy that you got from your own toy box. It’s made just for you and works perfectly with all the games you like to play. Native coins are like that toy, they are the main coins of a specific blockchain and are designed to work perfectly within that system.

Forked Coins:

Now, imagine you have a toy that looks similar to your favorite toy, but it’s a little different because it came from your cousin’s toy box. It was once part of your toy set but decided to have its own adventure. Forked coins are like that. They come from an existing blockchain but decided to have a separate path and rules, becoming a different coin altogether.

Wrapped Coins

Imagine you have a toy car that you want to play with in your friend’s sandbox, but your friend only allows toy trucks. So, you put your toy car inside a toy truck shell, and now you can play with it in the sandbox. Wrapped coins are like that. They’re one type of coin “dressed up” to look like another, so they can be used in different places.

Crypto Tokens Unveiled

Now, let’s talk about tokens! Tokens are digital assets that exist on a blockchain and have a specific purpose or function within a decentralized application (dApp) or platform.

Just like how you need tickets to attend a concert or tokens to play games at an arcade, you need crypto tokens to access various features and services in the world of blockchain and dApps.

They can represent utility, governance rights, or even ownership of digital assets, and are often used as a way to interact with, or support the growth of, the projects they are associated with.

Utility Tokens

Utility tokens provide access to a service or function on the blockchain or decentralized app (dApp). Some examples are Uniswap (UNI) and Chainlink (LINK).

Governance Tokens

Governance tokens give users a say in the decision-making process of the blockchain or dApp. You might have come across Maker (MKR), Compound (COMP), or Aave (AAVE).

Security Tokens

Security tokens represent a share of ownership or a claim on an asset or income stream. They follow securities regulations and compliance. Polymath (POLY) is an example.


Non-fungible tokens (NFTs) represent unique and indivisible digital items, like art or collectibles. They’re not interchangeable and have different values. CryptoPunks and Bored Apes are popular examples.

Coins & Tokens: Contrasting Features

Now that we’ve covered what coins and tokens are, let’s see how they’re different from each other. The main differences are:

  • Coins are better for general transactions and value preservation, while tokens are better for specific purposes and value creation.
  • Coins are created through mining, while tokens are usually pre-mined and distributed through smart contracts.
  • Coins are independent and run on their own blockchain, while tokens depend on an existing blockchain.

Top Coins & Tokens

Finally, let’s check out some popular crypto coins and tokens that you might come across.

Leading Crypto Coins

  • Bitcoin (BTC): The first and most famous cryptocurrency.
  • Ethereum (ETH): Known for its smart contract functionality and dApp development.
  • Binance Coin (BNB): Used for discounted trading fees and accessing services in the Binance ecosystem.
  • Dogecoin (DOGE): Famous for its Shiba Inu mascot and Elon Musk’s support.

Leading Crypto Tokens

  • Tether (USDT): The biggest stablecoin, pegged to the value of the dollar.
  • Uniswap (UNI): The governance token of the Uniswap protocol, a decentralized exchange.
  • Arbitrum (ARB): The governance token of Arbitrum, a layer-two blockchain for Ethereum. It was created by the Arbitrum Foundation and launched with a massive airdrop.

And that’s it! Now you have a better understanding of the differences between coins and tokens in the crypto world. Keep in mind that both coins and tokens can work together and complement each other in the crypto ecosystem. They can be used for various purposes, like buying, selling, staking, or participating in governance.

As you dive deeper into the world of cryptocurrencies, don’t forget to stay updated on the latest news, trends, and technologies. And most importantly, have fun exploring this ever-evolving digital landscape! Remember, knowledge is power, and with the right information, you’ll be ready to make informed decisions about your crypto investments.

Happy crypto adventures! 🚀

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