A token is a digital asset built on top of an existing blockchain rather than on its own dedicated network. For example, thousands of tokens run on the Ethereum blockchain using its ERC-20 standard, while Ethereum's native currency ETH is technically a coin, not a token.
The key difference between a coin and a token is that coins have their own blockchain (Bitcoin, Ethereum, Solana), while tokens are created using smart contracts on someone else's blockchain.
Tokens come in many varieties:
- Utility tokens – Provide access to a product or service. For example, a token might be required to pay for storage on a decentralized cloud platform.
- Governance tokens – Give holders voting power in a protocol's decision-making process, common in DeFi projects.
- Security tokens – Represent ownership in a real-world asset like stocks or real estate. Learn about RWA tokenization.
- Stablecoins – Tokens pegged to the value of a traditional currency. See our stablecoin guide.
- Meme tokens – Community-driven tokens, often without inherent utility.
Tokens can be traded on both centralized exchanges like Binance and decentralized exchanges (DEXs). Always research a token's purpose, team, and tokenomics before investing.