Recently, many people have been asking me how to distinguish between Tokens and Coins. Actually, this is a pretty common question. In the early days, everyone mainly talked about Bitcoin, Litecoin, and similar cryptocurrencies, so there was little confusion. But since Ethereum appeared, Token and Coin have started to be used interchangeably, and their Chinese translations have become tokens or cryptocurrencies, leading many investors to be unclear.

First, let's talk about what a Token is. Simply put, a Token is a digital asset that represents some kind of rights or certificates, which can be traded and transferred on a blockchain. Its biggest feature is— it doesn't have its own blockchain but operates on someone else's chain. For example, USDT, UNI are Tokens; they run on Ethereum. After Ethereum launched the ERC-20 standard in 2015, anyone could issue their own Token, which is why there are so many Tokens now.

Regarding the types of Tokens, according to the classification by the Swiss Financial Market Supervisory Authority, they can roughly be divided into three categories. Payment Tokens are mainly used for transaction settlement, like stablecoins; Utility Tokens provide access rights to applications, most ERC-20 tokens on Ethereum fall into this category; Asset-backed Tokens represent rights to a certain project, somewhat like stocks. However, in practice, a Token often has multiple attributes at once, making classification less clear.

So, what exactly is the difference between a Coin and a Token? The core difference is— one sentence— Coins have their own blockchain, Tokens do not. Bitcoin runs on the Bitcoin blockchain, Ethereum runs on the Ethereum blockchain; they are native assets. But Tokens are built on existing ecosystems, which often results in a less deep application ecosystem compared to Coins.

From a trading perspective, buying and selling Coins is the most basic asset transfer—you send Bitcoin from address A to address B. But buying and selling Tokens essentially involves calling smart contracts; for example, transferring USDT actually triggers the transfer function of the Ethereum smart contract behind the scenes. These transactions usually consume more resources, and Gas fees are higher.

From an investment perspective, Tokens and Coins each have their advantages. If you think of Coins as the infrastructure layer, Tokens are the application layer. Coins mainly solve fundamental issues, while Tokens provide various applications and services on top of that. Compared to Coins, Tokens are more scalable and easier to implement new features. For example, MakerDAO launching RWA (Real-World Assets) business is a good example.

But note that Tokens are usually more volatile than Coins, especially in bull markets. The price swings of UNI, SNX, MKR are often much larger than BTC or ETH, which offers more opportunities for short-term traders but also involves higher risks.

Regarding how to invest in Tokens, there are mainly two methods. The first is spot trading, which means directly buying and holding Tokens. For example, if UNI is now $3, buying one means you truly own one. A special reminder—beware of fake tokens with the same name. Some teams issue tokens with the same name as well-known Tokens but are worthless; once bought, they might be hard to sell. Always verify the contract address on the official website or blockchain explorer before trading.

The second is margin trading, mainly for speculating on price movements without actually holding the tokens. This method is more suitable for traders who want to profit from price differences and can avoid fake tokens. But be careful with leverage—it's best not to exceed 10x, because Tokens are highly volatile, and liquidation risks are higher.

No matter which method you choose, the most important thing is to select a safe and regulated trading platform. Many platforms now support Token trading, but their security and compliance vary greatly. This should be the first consideration when investing in Tokens. Lastly, remember that Tokens are more volatile than Coins, so managing position size carefully is especially important.