Perhaps the simplest way to think about the difference between a coin and a token is provided by CoinMarketCap on their FAQ page.
CoinMarketCap separates coins and tokens using the following logic:
“A Coin is a cryptocurrency that can operate independently. A Token is a cryptocurrency that depends on another cryptocurrency as a platform to operate. Check out the crypto tokens listings to view a list of tokens and their respective platforms.”
But CoinMarketCap’s classification of coins and tokens, while helpful, is probably oversimplified. Some of CoinMarketCap’s classifications conflict with the white papers of the underlying coins and tokens themselves.
For example, CoinMarketCap classifies “Waves” as a coin, but Waves refers to itself as a token in its whitepaper .
A more nuanced approach to defining the differences between a coin and a token may be to use CoinMarketCap’s criteria and add another criterion.
A “coin” exists independently using its own native blockchain platform AND is used solely as a store of monetary value, not other application functionality.
A “token” exists on top of another blockchain platform AND may be used as a store of monetary value, as well as other application functionality.
Overall, it’s vital to distinguish between classes in digital assets. There are those that are considered coins and others labeled as tokens. You should have a general understanding of the differences now, so let’s move forward to the quiz on coins and tokens!