Token
A token is a type of digital asset built on top of an existing blockchain rather than operating its own independent network, distinguishing it from a coin, such as bitcoin or Ethereum, which has its own dedicated blockchain. Tokens are typically created using a standardized template, called a token standard, on a host blockchain, with Ethereum’s ERC-20 standard being the most widely used example, allowing developers to launch new tokens quickly by following a common set of rules that ensure compatibility with wallets and exchanges.
Because tokens are built using smart contracts on an existing blockchain, launching one does not require building an entirely new network from scratch, which significantly lowers the technical barrier for creating a cryptocurrency. This is why thousands of tokens exist on Ethereum and other smart-contract-capable blockchains like Binance Smart Chain and Solana, ranging from legitimate projects with genuine utility to purely speculative or even fraudulent creations.
Tokens serve many different purposes depending on the project that issues them. Utility tokens grant holders access to a specific product or service within a platform, such as paying transaction fees or unlocking premium features. Governance tokens give holders voting rights over decisions related to a decentralized protocol, such as proposing or approving changes to how the system operates. Security tokens represent ownership in a real-world asset, such as company equity or real estate, and are typically subject to securities regulations. Non-fungible tokens, unlike the other categories, represent unique, non-interchangeable items rather than fungible units of value, commonly used for digital art, collectibles, and proof of ownership over unique digital or physical assets.
It is worth noting that in casual conversation, the words coin and token are sometimes used interchangeably, but the technical distinction matters, since a project’s decision to launch as a token on an existing blockchain versus building its own coin with a dedicated blockchain reflects fundamentally different levels of technical investment, independence, and long-term architectural goals. Many successful projects begin as tokens hosted on a platform like Ethereum during their early stages, then later launch their own independent mainnet and migrate holders over to a native coin once the project has matured and justifies the resources required to build and secure its own blockchain.