Tokens vs. Cryptocurrencies: a simple explanation
05.06.2025
At first glance, tokens and cryptocurrencies may seem like the same thing — both are digital assets. However, there are key differences, especially in how they are created and how they function. What is a cryptocurrency? A cryptocurrency is digital money that operates on its own blockchain. Examples include: Bitcoin (BTC) — runs on the Bitcoin blockchain Ethereum (ETH) — runs on the Ethereum blockchain Litecoin (LTC) — uses its own Litecoin blockchain Cryptocurrencies serve as a medium of exchange, store of value, and unit of account — and often power the security of the entire blockchain network. What is a token? A token is a digital asset built on top of an existing blockchain — most commonly Ethereum. A token does not have its own blockchain. Examples of tokens: USDT (Tether) — a stablecoin on Ethereum, TRON, and others UNI — the governance token of the Uniswap platform MATIC — the native token of the Polygon ecosystem (Polygon now also has its own blockchain)
Tokens can serve different purposes: Payment tokens — used as currency within an ecosystem Governance tokens — grant voting rights in projects Utility tokens — provide access to services NFTs (non-fungible tokens) — unique digital items In summary: all cryptocurrencies are tokens, but not all tokens are full-fledged cryptocurrencies. Understanding this difference is essential for investors, developers, and users in the crypto ecosystem.
Tokens can serve different purposes: Payment tokens — used as currency within an ecosystem Governance tokens — grant voting rights in projects Utility tokens — provide access to services NFTs (non-fungible tokens) — unique digital items In summary: all cryptocurrencies are tokens, but not all tokens are full-fledged cryptocurrencies. Understanding this difference is essential for investors, developers, and users in the crypto ecosystem.