Glossary

Token

Plain-language definition Crypto glossary

Key takeaways

A token is a digital asset created and managed by a smart contract on an existing blockchain, rather than running on its own dedicated network.
Because a token relies on its host chain for security and settlement, it differs from a coin like Bitcoin or ether, which is native to its own blockchain.
Tokens are easy to issue by deploying a contract, so thousands can exist on one platform and their quality and purpose vary enormously.

Definition

A token is a digital asset built on top of an existing blockchain, rather than one that has its own independent chain (a “coin,” strictly speaking). Tokens are typically created using a standard, such as Ethereum’s ERC-20 for fungible tokens, and can represent all kinds of things: a currency, a governance right, a claim on an asset, or access to a service.

Why it matters

In casual use, “coin” and “token” are often used interchangeably, but the technical distinction matters for understanding how an asset actually works: a token depends on the security and continued operation of its underlying blockchain, and its function is defined entirely by the smart contract that created it, which can vary enormously in quality and intent.

Example

Many DeFi and governance assets are tokens built on Ethereum or other smart-contract platforms. Browse individual asset pages on our markets page for details on specific projects.

This is educational information, not financial advice. Coingsty does not recommend buying or selling any asset.

FAQ

Frequently asked questions

What is the difference between a token and a coin?

A coin is native to its own blockchain, like Bitcoin or ether, and the network secures it directly. A token is created by a smart contract on an existing blockchain and relies on that host chain for security and settlement rather than having a network of its own.

What is an ERC-20 token?

ERC-20 is a shared standard on Ethereum that defines how interchangeable tokens track balances and transfers. Following a common standard lets tokens work consistently across wallets and applications on the same platform.

Are all tokens worth investing in?

No, and this is not financial advice. Because issuing a token only requires deploying a contract, they are easy to create and their quality and purpose vary enormously, which is exactly what tokenomics analysis tries to assess before forming any view.