What exactly is a Token in Chinese? A summary of the core differences between Token and Coin

What is a Token? An In-Depth Understanding of This Important Concept

In the Chinese context, Token is often translated as “代幣” (dài bì), “憑證” (píng zhèng), or “令牌” (lìng pái). Essentially, it is a digital asset that carries specific rights, represents value, or grants functionalities. These assets operate on blockchain networks and can be traded, transferred, or exchanged.

Unlike early cryptocurrency ecosystems, Tokens do not operate independently but are issued based on existing public blockchain platforms. After Ethereum introduced the ERC-20 standard in 2015, the issuance of Tokens became democratized—any development team can create their own Token based on this standard. Today, Ethereum has become the largest public chain ecosystem for Token issuance.

In simple terms, a Token is a collective concept, referring broadly to all non-public chain tokens. This includes tokens in DeFi ecosystems, Layer-2 solutions, and NFT-related tokens (such as APE, SAND, etc.).

Classification System and Functional Positioning of Tokens in Chinese

According to international financial regulatory frameworks, Tokens can be divided into three major categories, each with its own unique application scenarios and value expressions:

Payment Tokens are tools for secure, efficient, and low-cost payments, with stablecoins being a typical example. Their main function is to serve as a medium of value, mitigating volatility risks.

Utility Tokens grant holders the right to use specific applications or services, acting as a “pass.” Most ERC-20 tokens on Ethereum fall into this category, including Uniswap’s UNI, Compound’s COMP, etc.

Asset Tokens represent the holder’s equity or rights to specific projects or assets, similar to traditional shares. It is important to note that holding Tokens does not mean owning the project’s ownership or dividend rights. There is a fundamental difference between the crypto ecosystem and traditional stock markets in this regard.

In reality, a single Token often possesses multiple attributes and cannot be strictly classified into just one category.

The Fundamental Difference Between Token and Coin

The core distinction between Coin and Token lies in ownership—Coins have their own native blockchain, while Tokens do not.

Bitcoin (BTC) operates on the Bitcoin blockchain, and Ether (ETH) runs on the Ethereum blockchain. They are the native assets and foundational tokens of their respective networks. In contrast, Tokens are built on existing blockchains and depend on the ecosystem of the host public chain.

This fundamental difference leads to many secondary distinctions: Coins are usually at Layer-1, while Tokens often exist at Layer-2 or higher layers; the application ecosystem of Coins is generally broader, whereas Tokens are more flexible in scalability and application iteration; Coins are commonly issued through fundraising methods like ICO, IDO, IEO, etc., while Token issuance is relatively simpler.

Common Coins include BTC, LTC, ETH, SOL, DOT, ADA, XRP, FIL; well-known Tokens include MATIC, SAND, COMP, LINK, UNI, MKR, AAVE, etc.

Investing in Tokens vs. Investing in Coins: Which Is Better?

Investing in Tokens and Coins is not an either-or choice; each has its own characteristics and complements the other.

If we understand Coins as the infrastructure of public chains, Tokens are derivatives at the application layer. The former focuses on solving fundamental technical issues of blockchain and providing bottom-layer support for the entire ecosystem; the latter, based on this foundation, develops diversified applications and services to directly meet user needs. Both are indispensable and form an organic interaction.

Compared to Coins, Tokens have a clear advantage in application scalability and are easier to achieve rapid iteration. The value of Coins mainly concentrates on infrastructure optimization. Once failed, there is often no way back—examples include the decline of projects like Quantum Chain (QTUM) and Bytom (BTM). The value of Tokens lies in the diversification of application layers; even if a particular application is not recognized by the market, project teams can launch new business directions. MakerDAO’s RWA (Real-World Asset Tokenization) business is a good example of such flexible adjustment.

Another prominent feature is that Token prices tend to be more volatile than Coins. For example, UNI, SNX, MKR often experience intraday price swings larger than BTC and ETH, especially in bull markets. This high volatility creates abundant trading opportunities for short-term traders but also amplifies risks.

Ways to Invest in Tokens and Trading Methods

There are mainly two ways to invest in Tokens:

Spot trading is the most basic form of trading. Buyers and sellers exchange actual assets directly. For example, if the current price of UNI is $3, a buyer paying $3 will receive 1 UNI and become the full owner of that Token. The risk here is to guard against fake tokens with the same name—different teams may issue tokens with identical names but different actual assets. To avoid this, verify the Token’s smart contract address via the official website or blockchain explorers (such as Etherscan for Ethereum).

Margin trading is an advanced form. This type of trading usually does not involve actual token transfer, thus avoiding fake token risks. Margin trading uses leverage, requiring only a portion of the total position as margin. For example, with 10x leverage long on UNI at $3, you only need $0.3 to control 1 UNI. If the trading involves CFDs or U-based contracts, investors may not even need to hold the actual Token.

Risk management must be emphasized: Due to the high volatility of Tokens compared to Coins, leverage should generally not exceed 10x, and position sizes should be strictly controlled. Newly listed Tokens are especially volatile, with higher liquidation risks. Choosing a safe, reputable, and regulated trading platform is the first priority for starting Token investment.

The operational processes of spot and margin trading are similar; the key difference lies in whether actual assets are transferred and whether leverage is used. Regardless of the method chosen, understanding the basic properties of Tokens and mastering risk management principles are essential to seize opportunities in this market full of both opportunities and challenges.