Security Tokens Explained: Coins vs. Tokens

Many people use the terms coin and token interchangeably. In fact, they do not mean the same thing and are used very differently in the crypto and blockchain spheres. A “coin” refers to a digital form of money that is created to act as a payment method. Crypto coins can generally be purchased, sold, traded, or converted into other cryptocurrencies or for fiat currencies. They are used as a form of value exchange and for investment purposes. These types of coins use blockchain technology—which is often their own blockchain. For instance, Bitcoin was created as a crypto coin to be used as “money.” Recall from our above definition, money serves three main purposes: (1) means of payment; (2) store of value; and (3) unit of account. Bitcoin uses the Bitcoin Blockchain. The same is true for several other cryptocurrencies. Litecoin uses the Litecoin blockchain, Ether uses the Ethereum Blockchain, and Monero uses the Monero Blockchain. Tokens are digital representations of an asset that will have either ownership interests or utility. Tokens are distributed to investors during the entity’s or individual’s ICO. Tokens often rely on the Ethereum Blockchain. These tokens do not have the same “money” purposes as cryptocurrencies.