Recently, I’ve noticed that many novice investors confuse tokens and coins. In fact, these two concepts are quite different. In the early days of cryptocurrencies, they were mainly called coins—such as Bitcoin, Litecoin, and Dogecoin. After Ethereum came along, the concept of tokens truly became popular. In Chinese, both are translated as “tokens” or “cryptocurrencies,” which explains why so many people can’t tell them apart.

Simply put, tokens usually refer to digital assets issued on top of other public blockchains—called Tokens in English. After Ethereum introduced the ERC-20 standard in 2015, anyone could issue their own tokens on it, which led to the explosive growth of tokens afterward. Coins, on the other hand, are cryptocurrencies that have their own independent blockchains, such as Bitcoin, Ethereum, and Solana.

The biggest difference between the two is whether they have a native blockchain. Tokens don’t have their own blockchain; at most, they can only run on Layer-2 or Layer-3 solutions. This is why the application ecosystems of tokens are often not as strong as those of coins. In terms of functions, tokens are mainly used for payments, staking, voting, and similar purposes, while coins have relatively simpler functions. Common tokens include UNI, MATIC, LINK, and COMP—each issued on Ethereum.

According to the Swiss financial regulator’s classification, tokens can be divided into three types. Payment tokens are mainly for enabling efficient payments, and stablecoins fall into this category. Utility tokens provide access to applications; most ERC-20 tokens are of this type. Asset tokens represent part of a project’s ownership—somewhat like the concept of stocks—but it’s important to note that in the crypto space, coins generally do not have dividend rights. In reality, a token may have multiple attributes at the same time, so categorizing them can be more complicated.

When it comes to security, tokens are issued based on a specific public blockchain, so the security of the public chain directly affects the security of the tokens. Since Ethereum is widely recognized as a relatively secure public chain, the tokens issued on it are comparatively more assured. However, compared with native coins, tokens do exist with more risks—such as contract vulnerabilities, malicious minting, or team “running away.” Token projects issued on new blockchains especially need caution, because they lack market testing.

From an investment perspective, tokens and coins each have their own advantages. Coins mainly solve infrastructure problems, while tokens provide various applications and services on top of that. Tokens have greater extensibility and are generally easier to implement. Compared with coins, tokens also have richer use cases—for example, MakerDAO’s RWA business is a good case in point.

Another feature is that token volatility is often higher than coin volatility. The price swings of tokens like UNI and MKR are typically larger than BTC and ETH—especially in bull markets. This gives short-term investors more opportunities, but high volatility also means higher risk, so remember that.

If you want to invest in tokens, there are two main approaches. One is spot trading—directly buying and holding tokens. This method requires guarding against fake-token risk, and you should verify the contract address through the official website or a block explorer. The other is margin trading, using leverage to amplify returns, but this method carries higher risk. You need to control your position size and leverage ratio well, and it’s not recommended to exceed 10x.

As for specific token types, UNI is Uniswap’s governance token. In June 2022, it fell from $45 to $3.1, and afterward it has remained in a choppy range between $3 and $9. MATIC is Polygon’s token. Its trend is relatively strong: it tends to hold up better when prices drop and can rise sharply when markets run up. APE is the governance coin of Bored Ape Yacht Club. It dropped from a historical high of $32 to $1, a decline of more than 97%, and it is still trading at a low level.

Overall, the token market is a mix of opportunities and risks. Choosing a secure trading platform is important—don’t put large amounts of money into assets you’re not familiar with. It’s recommended to start by trying with a small amount, build up trading experience, and then gradually increase your investment. Remember: high token volatility means more opportunities, but you also need to stay alert to liquidation risk. Reasonably controlling your position size is the way to survive long term.