I just realized that many newcomers to crypto still confuse coins and tokens. In fact, these two are quite different, especially in terms of operation and profit potential.

A token is a type of digital asset issued on the existing blockchain of a project. Unlike coins, tokens do not have their own blockchain but operate based on the blockchain platform of other projects. The advantage of tokens is that holders have the right to participate in the network of the system, not just use them for transactions.

Currently, Ethereum is the most popular platform for creating tokens, with the ERC-20 standard. Additionally, NEO and Tron also support creating tokens with their own standards.

Creating tokens is also quite simple. Developers only need to pay fees using the native currency of the main blockchain. For example, to create a token on Ethereum, use ETH to pay the fee. Nowadays, most tokens exist on DeFi applications or decentralized applications.

There are two main types of tokens. The first is utility tokens — created to serve a specific project, which can be used for payments or discounts. The second is security tokens — similar to electronic stocks, where you receive dividends based on the number of tokens owned and have voting rights in project decisions.

The benefit of tokens is saving time and costs compared to creating a separate blockchain, while still having full cryptocurrency features. Security is also high because they benefit from the main blockchain — to attack a token, one must penetrate the blockchain, which is large-scale and highly secure.

However, tokens also have disadvantages. They carry high risks due to extreme volatility. A token can rise from a few USD to hundreds of USD and then fall back within a short period. Tokens are also less common than coins, with fewer exchanges supporting them, limiting flexibility.

There are many ways to buy tokens. The first is participating in ICOs or public sales of projects — the price is lower, but you need analytical skills to select promising projects. After the token is listed on exchanges, you can trade it. Another way is buying directly on major exchanges. Or purchasing on decentralized exchanges like Bancor or Kyber Network. Whichever method you choose, you need to transfer funds to a compatible digital wallet for the token you want to buy.

Should you invest in tokens? The answer depends on each person’s situation. For new investors, most experts recommend focusing on coins first because tokens are a risky field. Although the profit potential is huge, the risks are also very high. Coins are more stable, highly liquid, and more popular, making trading easier.

But for long-term investors with experience and a taste for risk, tokens are very attractive. Most tokens are highly speculative. The Ethereum ICO is a typical example — tokens were sold at $0.31 but later soared to $2,600, a gain of over 8,000 times. That’s why tokens attract many investors seeking high returns.

But remember that crypto is a risky investment field. Do thorough research and build a solid knowledge foundation before stepping in. Good luck on this journey.