What is a token and how is it different from a coin?
Introduction
When you first enter the world of digital assets, you encounter many terms that can be confusing. Two terms you hear most often are “Coin” and “Token.”
Many people think these are the same, but in reality, there are fundamental differences between them that are essential for every user to understand.
In this article, in simple language with numerous examples, we explain the differences between coins and tokens and explore the use cases of each.
What Is a Coin?
Definition
A coin is a digital asset that:
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Runs on its own dedicated blockchain
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Is primarily used as a currency
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Is designed for transferring value
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Typically has more limited use cases than tokens
Characteristics of Coins
| Feature | Description |
|---|---|
| Dedicated blockchain | Each coin runs on its own dedicated network |
| Primary use | Value transfer and storage |
| Independence | Independent from other networks |
| Security | Benefits from its own network’s security |
Famous Examples of Coins
| Coin | Blockchain | Primary Use |
|---|---|---|
| Bitcoin (BTC) | Bitcoin Network | Store of value and payment |
| Ethereum (ETH) | Ethereum Network | Paying transaction fees and executing smart contracts |
| Polygon (MATIC) | Polygon Network | Paying fees and participating in network security |
| Solana (SOL) | Solana Network | Paying fees and executing applications |
Important Note: Coins are typically used to pay transaction fees on their own network. For example, to make a transaction on the Polygon network, you need MATIC coins.
What Is a Token?
Definition
A token is a digital asset that:
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Is built on an existing blockchain (like Polygon or Ethereum)
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Has more diverse use cases than coins
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Can represent any type of value
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Is created using smart contracts
Characteristics of Tokens
| Feature | Description |
|---|---|
| Built on another blockchain | Uses existing blockchain infrastructure |
| Programmability | Can have complex logic |
| Diverse use cases | From assets to voting rights and access |
| Easier to create | Simpler than building a new blockchain |
Famous Examples of Tokens
| Token | Blockchain | Use Case |
|---|---|---|
| USDT (Tether) | Ethereum, Polygon, and others | Stablecoin (stable value) |
| UNI | Ethereum | Governance token of Uniswap exchange |
| AAVE | Ethereum, Polygon | Token of the Aave lending protocol |
| QUICK | Polygon | Token of Quickswap DEX |
Key Differences Between Coins and Tokens
1. Dedicated Blockchain vs. Built on Another Blockchain
| Coin | Token |
|---|---|
| Has its own dedicated blockchain | Built on an existing blockchain |
| Requires building a new network | Created with a smart contract |
| Example: Bitcoin on Bitcoin Network | Example: Tokens on Polygon |
2. Use Case
| Coin | Token |
|---|---|
| Primarily for value transfer | Diverse use cases (governance, access, assets, etc.) |
| Limited to monetary functions | Can represent any type of value |
3. Cost of Creation
| Coin | Token |
|---|---|
| Very high (requires building a new network) | Relatively low (using ready-made templates) |
4. Standards
| Coin | Token |
|---|---|
| Network-specific standard | Defined standards (e.g., ERC-20 on Ethereum, ERC-721 for NFTs) |
5. Security
| Coin | Token |
|---|---|
| Benefits from its own network’s security | Benefits from the host network’s security |
Token Standards
ERC-20: The Main Token Standard
The ERC-20 standard is the most common standard for creating tokens on the Ethereum network and compatible networks like Polygon.
ERC-20 Features:
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Transferability
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Receivability
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Balance checking
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Approval and allowance
Other Important Standards
| Standard | Use Case | Description |
|---|---|---|
| ERC-721 | NFT | Non-fungible tokens (each token is unique) |
| ERC-1155 | Hybrid tokens | Both fungible and non-fungible |
| ERC-777 | Advanced tokens | More features than ERC-20 |
Standards on Polygon
Polygon, as an Ethereum-compatible network, supports all Ethereum standards. This means tokens built on Polygon can also work with Ethereum applications.
Types of Tokens by Use Case
1. Utility Tokens
These tokens are used to access a specific service or product.
Examples:
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Token for paying fees in an application
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Token for accessing specific features
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Token for using platform services
2. Governance Tokens
These tokens give users voting rights in project decision-making.
Examples:
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UNI (Uniswap governance token)
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AAVE (Aave governance token)
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MKR (MakerDAO governance token)
3. Security Tokens
These tokens represent ownership in an asset or company and are subject to financial regulations.
Examples:
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Tokens representing company shares
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Tokens representing real estate
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Tokens representing bonds
4. Stablecoins
Tokens whose value is pegged to a stable asset (like the US dollar).
Examples:
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USDT (Tether)
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USDC
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DAI
5. Non-Fungible Tokens (NFTs)
Each token is unique and cannot be exchanged for another token.
Examples:
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Digital artworks
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Digital collectibles
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Ownership documents
Coin vs. Token Comparison on the Polygon Network
Coin on Polygon
MATIC is the native coin of the Polygon network, used for:
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Paying transaction fees
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Participating in network security (staking)
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Serving as the unit of value on the Polygon network
Tokens on Polygon
Thousands of different tokens have been built on the Polygon network, each with specific use cases:
| Token | Type | Use Case |
|---|---|---|
| QUICK | Utility/Governance | Used on Quickswap exchange |
| USDC | Stablecoin | Stable value pegged to USD |
| WETH | Token | Wrapped Ethereum version on Polygon |
| Project tokens | Variable | Various applications |
Tokens and Coins in Omid Coin
Omid Coin, as a project operating on the Polygon network, uses tokens to provide its services.
The Role of Tokens in Omid Coin
Without providing unconfirmed information about the exact structure, tokens in projects like Omid Coin typically serve the following roles:
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Access to services: Users need tokens to use the project’s services
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User participation: Tokens are used to incentivize user engagement
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Governance: Giving users voting rights in decision-making
The Importance of Choosing the Polygon Network
By choosing the Polygon network, Omid Coin enables the creation of efficient tokens with low cost and high speed.
Omid Coin = Good Technology = Better Life
How to Create a Token
Step 1: Choose a Network
Choose which blockchain to build your token on:
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Ethereum (high cost, high security)
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Polygon (low cost, high speed)
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Other networks
Step 2: Choose a Standard
Choose the appropriate standard:
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ERC-20 for fungible tokens
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ERC-721 for NFTs
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ERC-1155 for hybrid tokens
Step 3: Write Code
Write the smart contract code using Solidity language
Step 4: Test
Thoroughly test the code on a test network
Step 5: Security Audit
Security review by reputable firms
Step 6: Deploy
Deploy on the main network
Does Creating a Token Require Technical Knowledge?
For creating a simple token, you can use no-code tools. However, for more complex tokens, programming knowledge is required.
Common Misconceptions
Misconception 1: Coins and tokens are the same
Reality: Coins run on their own dedicated blockchain, while tokens are built on existing blockchains.
Misconception 2: All tokens are investments
Reality: Many tokens are designed for use in a specific service and are not intended as investments.
Misconception 3: Tokens are always on Ethereum
Reality: Tokens are built on various networks including Polygon, BNB Chain, and others.
Misconception 4: Every token can be bought and sold
Reality: Some tokens have low liquidity or are not traded on exchanges at all.
Final Comparison Table
| Criterion | Coin | Token |
|---|---|---|
| Blockchain | Its own dedicated | On an existing blockchain |
| Creation | Requires building a new network | With a smart contract |
| Primary use | Value transfer, fees | Diverse (services, governance, assets) |
| Creation cost | Very high | Relatively low |
| Standard | Proprietary | Defined (ERC-20, etc.) |
| Example | Bitcoin, Ethereum, MATIC | USDT, UNI, QUICK |
| Security | From its own network | From the host network |
| Independence | Complete | Dependent on the host network |
Summary
Understanding the difference between coins and tokens is one of the fundamental concepts for anyone entering the world of digital assets.
Summary of Differences:
Coin:
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Has its own dedicated blockchain
-
Primarily used for value transfer
-
Like Bitcoin and MATIC
Token:
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Built on an existing blockchain
-
Has more diverse use cases
-
Like tokens on Polygon and various projects
The Polygon network, by supporting various token standards, provides an ideal platform for innovative projects. Omid Coin, as a project operating on Polygon, leverages these capabilities to offer better services to its users.
FAQ
1. Is Ethereum a coin or a token?
Ethereum (ETH) is a coin because it runs on its own dedicated blockchain (the Ethereum network).
2. Is MATIC a token or a coin?
MATIC is the native coin of the Polygon network, running on its own dedicated blockchain.
3. Can a token be converted to a coin?
No, they have fundamentally different natures. However, tokens can be traded for coins on exchanges.
4. What is the difference between ERC-20 tokens and other tokens?
ERC-20 is a standard for creating tokens on the Ethereum network and compatible networks like Polygon.
5. What type of token does Omid Coin use?
Omid Coin, as a project on Polygon, uses common token standards on this network.
6. Does creating a token cost money?
Yes, you must pay transaction fees (Gas Fees) to deploy the smart contract on the network, which is very low on Polygon.
7. What is the difference between a utility token and a security token?
A utility token is designed for using a service, while a security token represents ownership in an asset or company.
8. Can I create my own token?
Yes, with programming knowledge or using no-code tools, you can create your token on networks like Polygon.
