What is a Token? How does it differ from a Coin? The Complete Guide to Investing in Tokens

Explanation of Token in Chinese

Token, commonly translated as pass, token, or coin in Chinese, represents a digital asset with specific rights, certificates, or value forms. These assets can be traded, transferred, and exchanged on their respective blockchains. Unlike Coins, Tokens do not have their own independent public chain but are built on existing blockchain ecosystems.

Since Ethereum launched the ERC-20 token standard in 2015, anyone can issue their own Token on that platform. This innovation significantly lowered the issuance threshold, making Ethereum the public chain with the largest volume of Token issuance. In short, Token is a collective term that covers all non-public chain tokens, including DeFi application tokens, Layer-2 solution tokens, NFT tokens (such as APE, SAND), and others.

Fundamental Difference Between Coin and Token

The core difference between Coin and Token is that Coins have their own independent blockchain, while Tokens do not.

Bitcoin (BTC) runs on the Bitcoin blockchain, and Ether (ETH) runs on the Ethereum blockchain. They are native assets of their respective networks, classified as Coins. Tokens, on the other hand, are attached to existing blockchain systems, which limits their ecosystem applications and may even prevent them from building complete applications independently.

What Types of Tokens Are There?

According to the classification standards of the Swiss Financial Market Supervisory Authority (FINMA), Tokens can be divided into three main types:

Payment Tokens are mainly designed for secure, efficient, and low-cost payments; stablecoins belong to this category.

Utility Tokens provide access rights to various applications. Most ERC-20 tokens on Ethereum fall into this category. Users hold them to use specific services or applications.

Asset Tokens represent participation rights in project development. Holders can enjoy value appreciation brought by the tokens, similar to stocks. However, it should be noted that investors in the crypto space usually do not own project ownership or dividend rights.

In practice, a Token often possesses multiple of these attributes simultaneously, making it difficult to classify clearly. This multi-dimensional nature also provides more application possibilities.

Token or Coin? Which is More Promising for Investment

Both have their advantages and complement each other. If Coin is understood as the infrastructure at the public chain layer, Token is a functional tool at the application layer— the former solves systemic foundational issues, while the latter directly serves user needs on top of it.

Compared to Coins, Tokens have greater scalability in applications and services, and are easier to implement. The value of Coins is limited by infrastructure optimization; if the infrastructure fails, it often cannot pivot, as seen with projects like Quantum Chain (QTUM) and Bytom (BTM). Tokens can flexibly launch diverse services; for example, MakerDAO’s tokenization of real-world assets has regained market recognition.

Moreover, Token volatility is usually much higher than Coins. Tokens like UNI, SNX, MKR have price fluctuations significantly exceeding BTC and ETH, especially during bull markets. This creates more opportunities for short-term traders but also increases risks.

Two Main Ways to Invest in Tokens

Spot Trading of Tokens

Spot trading is based on actual asset transfer. For example, if the current price of UNI is $3, the buyer pays $3 and fully owns 1 UNI.

Key Reminder: Be cautious of fake tokens with the same name. If someone issues a Token with the same name as a well-known token but without value, it can be difficult to cash out once purchased by mistake. Always verify the token contract address on the official website or blockchain explorer before trading.

Margin Trading of Tokens

Margin trading allows leverage for non-full transactions. For example, using 10x leverage to go long on UNI at $3, only $0.3 margin is needed to control 1 UNI position. Contracts or U-based contracts trading may not involve actual token holding, which differs entirely from spot trading.

Due to the high volatility of Tokens, careful management of positions and leverage is essential. It is recommended not to exceed 10x leverage, especially for newly issued tokens, to avoid liquidation risks.

Regardless of the trading method, choosing a regulated, secure, and reliable trading platform is crucial—this is the primary prerequisite for investing in Tokens.

Basic Steps for Token Trading

The process of investing in Tokens is relatively standardized:

Step 1: Access the trading platform and log in

Visit the official website of the trading platform and click the login button. New users need to complete account registration first.

Step 2: Search and select the target Token

Enter the name of the Token you want to trade (e.g., UNI for Uniswap) in the search box. The system will display relevant trading pairs.

Step 3: Configure trading parameters

Fill in your trading direction (buy or sell), trading type, quantity, leverage (if margin trading), stop-loss, and take-profit levels, then confirm the order.

With these three simple steps, you can start your Token investment journey, but the key is to fully understand the risks, choose the right platform, and set positions cautiously.