Recently, I’ve noticed that many people don’t understand the difference between Token and Coin. Actually, this is a good question because as the blockchain ecosystem becomes more complex, these two concepts are indeed easy to confuse.

Let’s start with the history. Early cryptocurrencies were called Coins—Bitcoin, Litecoin, Dogecoin, etc.—everyone used Coins. But after Ethereum appeared in 2015, things changed. Ethereum introduced the ERC-20 standard, allowing anyone to issue their own Token on top of it, so Coin and Token started being used interchangeably, and both were translated as “tokens” in Chinese, which confused investors.

The real difference is simple: Token is also called a pass or token in Chinese, essentially a digital asset representing specific rights, but it doesn’t have its own blockchain; it operates on someone else’s chain. For example, USDT, UNI are Tokens built on the Ethereum ecosystem. Coins are different—they have their own blockchain, like Bitcoin on the Bitcoin blockchain, and Ethereum on the Ethereum blockchain. They are Layer-1 native assets.

From an application perspective, Tokens can be divided into three categories. The first is payment tokens, like stablecoins, mainly used for secure and efficient payments. The second is utility tokens, which are also called functional tokens, serving as access passes for various applications; most ERC-20 tokens on Ethereum fall into this category. The third is asset-backed tokens, which mean you are a part of the project and can enjoy the value of the token, similar to stocks. But note, this is different from bank tokens—bank tokens are digital certificates issued by financial institutions, while crypto tokens are issued in a decentralized manner.

There are also differences at the transaction level. Buying and selling Coins is basically asset transfer between addresses—for example, sending Bitcoin from address A to address B. This is the most basic accounting function of the blockchain. But buying and selling Tokens essentially involves calling smart contracts; for example, transferring USDT triggers a transfer function inside the Ethereum smart contract. These transactions consume more resources, and Gas fees are often higher.

From an investment perspective, both have their advantages. Coins mainly solve infrastructure issues, while Tokens provide various applications and services on top of that. Tokens are more scalable and easier to implement—if an application isn’t popular, the team can launch new products. But this also means Token volatility is usually higher than Coins, especially in a bull market, offering more short-term trading opportunities, though with greater risks.

If you want to invest in Tokens, there are mainly two ways. One is spot trading—buying and holding directly, but be careful of fake tokens—tokens with the same name could be scams. Always verify the contract address on the official website or blockchain explorer. The second is margin trading—trading price differences without actually owning the tokens, more suitable for pure speculation on price movements.

A suggestion is, because Token prices are more volatile, especially for newly issued tokens, you must control your position size and leverage carefully. Leverage should preferably not exceed 10 times, or the risk of liquidation is very high. Regardless of which trading method you choose, the most important thing is to select a safe and reputable trading platform with proper regulation—that’s the foundation for investing in Tokens.