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Cryptocurrency FAQ - What's the difference between a coin and a token?
Many people use the terms "coin" and "token" interchangeably when they discuss cryptocurrencies, or blockchain projects. But is there a real difference between those two terms? The answer is YES! There is one subtle, but important difference between them, and it's important to understand it if you are starting to learn about cryptocurrencies.
A token, on the other hand, can be thought of as a cryptocurrency that does not have its own unique blockchain. In fact, it is built on top of another blockchain.
Another way to look at tokens is to compare them with an experience many people have when they visit an arcade. If you want to play the arcade games, you need to buy the metal coins from the token dispensers. It's the arcade tokens that provide access to the games, not fiat money.
All of the above examples of tokens were designed to be used on top of the Ethereum blockchain, and intended to operate within the Ethereum ecosystem. As such, any transaction associated with these types of tokens (checking balances, moving tokens to another wallet address, execution of smart contracts, etc.) requires ETH to process it.
It's important to understand that the Ethereum ecosystem contains both its own coin (ETH), and its own blockchain which tokens are designed with.
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