Recently, someone asked me what the exact difference is between a Token and a Coin. Actually, quite a lot of people ask this question, because after entering the crypto space, everyone finds that the names of virtual currencies are all over the place—some are called Coins, and some are called Tokens. In Chinese, both are often translated as “tokens,” which easily leads to confusion.

In the early days, it was pretty straightforward. Coins like Bitcoin and Litecoin were simply called Coins, and no one used the term Token. But once Ethereum came onto the scene, the whole situation changed. Ethereum introduced the ERC-20 standard, allowing anyone to issue their own Tokens on top of it. That’s what led to Token and Coin being used interchangeably and left many investors puzzled.

Let me first make it clear what a Token is. Simply put, a Token is a virtual currency built on someone else’s blockchain. It represents some form of entitlement, credential, or asset, and it can be traded, transferred, or exchanged. Unlike Coins, which have their own independent blockchains, Tokens depend on existing blockchain ecosystems to function. For example, USDT and UNI are Tokens—they both run on Ethereum.

So what types of Tokens are there? According to regulatory classifications, there are roughly three types. The first is payment Tokens, mainly used for transaction settlement; stablecoins are a typical example. The second is utility Tokens, which grant access permissions for various applications; most Tokens on Ethereum fall into this category. The third is asset Tokens, which represent your stake in a particular project—somewhat like stocks. However, in practice, things are often more complex, and a single Token may have multiple attributes at the same time.

Now for the key point: what is the most fundamental difference between Tokens and Coins? Coins have their own blockchains, while Tokens do not. BTC runs on the Bitcoin blockchain, and ETH runs on the Ethereum blockchain—these are the native assets of those networks. But Tokens are built on top of existing blockchains, which is also why Token ecosystems and real-world applications are often not as strong as Coins.

From a trading perspective, buying and selling Coins is essentially about transferring assets. When you send Bitcoin from address A to address B, that’s the most basic accounting function of a blockchain. But buying and selling Tokens actually involves calling smart contracts. For example, when you transfer USDT, the transfer function of the corresponding Ethereum smart contract is triggered in the background. These transactions usually consume more resources, and Gas fees are typically higher as well.

So is it better to invest in Tokens or Coins? My view is that both have their own advantages and both are indispensable. Coins mainly solve infrastructure problems, while Tokens build on top of that to provide various applications and services. Moreover, Token applications often have broader room for expansion and are easier to innovate with. Projects like MakerDAO can continuously launch new businesses and services, but Coins are different—once the underlying infrastructure fails, it’s hard to recover.

Another important point is that Tokens are usually more volatile than Coins. Tokens like UNI and MKR often have wider price fluctuations than BTC and ETH, especially during bull markets, which creates more opportunities for short-term traders. Of course, higher volatility also means higher risk, and that cannot be ignored.

How do you invest in Tokens? There are mainly two methods. The first is spot trading: you buy the Tokens directly and hold them, just like buying stocks. But be careful of fake tokens. Sometimes people issue garbage Tokens with the same name, and if you buy the wrong one, it’s hard to get rid of it. Before trading, you should always verify the contract address via the official website or a blockchain explorer.

The second method is margin trading. With this approach, you don’t need to actually hold the virtual currency—you just trade based on the price difference, which saves a lot of hassle and also helps avoid the risk of fake coins. It’s more suitable for traders who only want to speculate on price movements. However, you must pay attention to position sizing and leverage. Since Tokens are so volatile, it’s best not to use leverage above 10x, or you could easily get liquidated.

No matter which method you choose, the most important thing is to select a secure trading platform that is regulated by authoritative institutions. This is the first step in investing in Token cryptocurrencies, and it’s not something you should take lightly.