What is a Token in Chinese? How exactly are Coin and Token different?

When it comes to cryptocurrency investment, many people tend to confuse Token and Coin. Early Bitcoin and Litecoin were Coins, but with the rise of Ethereum, various Tokens emerged endlessly. Eventually, the Chinese translation all became “代幣” (tokens), causing investors to be confused. Today, let’s thoroughly clarify these two concepts.

Token in Chinese is “代幣,” but not all tokens are the same

Token is usually translated into Chinese as 代幣, 令牌, or 通行證. Essentially, it is a digital representation of specific rights or assets that can be traded, transferred, and exchanged on the blockchain.

The key point is: Tokens do not have their own native blockchain; they are built on existing public chains. After Ethereum launched the ERC-20 standard in 2015, anyone could issue Tokens on Ethereum. This is also why Ethereum became the public chain with the largest Token issuance.

In simple terms, Tokens are a general term for non-native tokens, including DeFi tokens, Layer-2 tokens, NFT tokens (such as APE, SAND, etc.).

There are three types of Tokens, each with different uses

According to financial regulatory classifications, Tokens are mainly divided into three categories:

Payment Tokens - Mainly used for secure, efficient, low-cost payments. Stablecoins are typical representatives.

Utility Tokens - Provide access rights to applications. Most ERC-20 tokens on Ethereum belong to this category. Holding such Tokens is like holding a “pass” to enter a certain ecosystem.

Asset Tokens - Represent a certain stake or rights in a project. Holding this Token means being a member of the project and enjoying its value. However, note that this does not mean owning the project’s equity or rights to dividends.

In practice, many Tokens have multiple attributes, and the boundaries are not so clear-cut.

Token vs Coin: What is the fundamental difference?

The core difference is very clear:

Coins have their own independent blockchain. Bitcoin runs on the Bitcoin blockchain, Ether runs on the Ethereum blockchain. They are the native assets of these networks and are Layer-1 (Layer-1) infrastructure.

Tokens are built on existing blockchains. Whether Layer-2 or Layer-3 projects, Tokens rely on other public chains to operate. This often results in Tokens having less application capability compared to Coins.

Specifically:

Invest in Tokens or Coins? Each has its own approach

Simply put, Coins are the infrastructure layer, Tokens are the application layer. Coins solve underlying technical problems, while Tokens develop specific applications on top of them. Both are indispensable.

But from an investment perspective, each has advantages and disadvantages:

Advantages of Tokens - More flexible and diverse application scenarios. If an application is unpopular, the project team can quickly adjust or launch new products. If the main chain technology fails, there is little chance to turn around, as with Quantum Chain or Bifrost.

Risks of Tokens - Usually more volatile than Coins. For example, DeFi tokens like UNI, SNX, MKR often fluctuate more than BTC and ETH daily, especially during bull markets. This creates more opportunities for short-term traders but also entails greater risks.

How to trade Tokens? Two options to choose from

Method 1: Spot Trading

Spot trading is the most straightforward—buy and sell Tokens directly. For example, if UNI is currently priced at $3, you buy 1 for $3, and after the transaction, you truly own that Token.

But beware of the trap of fake tokens with the same name. When a token becomes popular, someone will immediately issue a different token with the same name. To avoid confusion, always verify the contract address before buying to ensure you are purchasing the official genuine token.

Method 2: Margin Trading

If you don’t want to hold Tokens directly, you can also trade through margin trading. The biggest advantage is controlling large positions with a small amount of capital. For example, with $0.3, you can trade a $3 position of UNI (10x leverage). This can amplify gains but also increases risks.

Contracts for difference (CFDs), U-based contracts, and other methods do not involve actual token ownership; profits or losses are based solely on price movements.

Recommendations for choosing a trading method

No matter which method you choose, risk management is essential:

Control leverage - Especially for Tokens, daily volatility over 20% is common. It’s best not to exceed 10x leverage to prevent liquidation.

Choose reputable platforms - Security is the top priority. Be sure to select regulated, well-secured trading platforms.

Learn the basics - Before real trading, understand the fundamentals of Tokens, project directions, and market sentiment. Avoid blindly following the crowd.

In summary, although the Chinese translation of Token is “代幣,” the difference from Coin is very clear. Understanding these differences will help you make more informed investment decisions.