Coins
Coins refer to any cryptocurrency that, such as Bitcoin, has a standalone, independent blockchain.
These cryptocurrencies are bootstrapped from scratch, and to achieve a certain objective, the wider network is explicitly designed. Bitcoin, for instance, exists as a censorship-resistant value store and exchange medium that has a secure, fixed monetary policy. Bitcoin’s native token, BTC (i.e., bitcoins), is the market’s most liquid cryptocurrency and has both the highest market cap and realised market cap in the cryptocurrency industry.
Typically, Coin projects draw inspiration from past technologies or other cryptocurrencies and fuse them into a specific purpose in an innovative network catering.
The native coin of a smart contract platform for the creation of general-purpose computer programmes running on a decentralised blockchain is another example of a coin, Ethereum’s Ether (ETH). Ethereum focuses on arbitrary programme data instead of focusing on financial data, which can cover anything from games to social media. Ether is used on the network to send / receive, manage assets, pay gas fees, and interact with decentralised applications (dapps).
Tokens
Tokens are a distinctive outlay of wider platforms for smart contracts such as Ethereum that allow users to generate, issue and manage tokens that are derivatives of the primary blockchain.
For example, Ethereum’s ERC-20 token standard, which is essentially a protocol for creating tokens (besides ETH) on the Ethereum blockchain that can be exchanged with each other, fueled the ICO craze of 2017. Projects would use smart contracts to announce or build an Ethereum application and issue a native token for use in that application, raising funds in the process directly from investors in ETH.
Tokens occupy a unique corner of the cryptocurrency market where they function as “utility” tokens within the ecosystem of an application to encourage certain behaviour or pay fees. The popular ERC-20 token Dai, for instance, is part of the MakerDAO dapp on Ethereum. MakerDAO, which is designed to be stable, is a way for users to access credit instruments such as lending / borrowing using Dai. Any other ERC-20 token or other Ethereum-based standards (i.e. ERC-721), including the ETH coin, may be exchanged for ERC-20 tokens like Dai.
As a result, tokens exist within the broader cryptocurrency / blockchain network of a coin as application-specific tokens, like Dai within the ecosystem of Ethereum.
Coins must be exchanged through cryptocurrency exchanges with each other because they are built on various, non-standardized code protocols. In contrast, Ethereum tokens (e.g., ERC-20) can be exchanged with minimal friction between each other through internal applications because they are built on standardised code protocols.