SPLITTING HAIRS: COINS VS. TOKENS
Coins are a term reserved for cryptocurrency assets that are easily exchangeable for goods and services and therefore are equivalent to a more traditional form of “currency”. Similar to fiat currencies like USD or CAD, these coins behave like traditional money since they are fungible, divisible and easily exchangeable. The most common example of this would be Bitcoin.
On the other hand, assets called tokens, often don’t carry much value outside the scope of the blockchain project that issued them. These are still technically “cryptocurrencies” since that term is just a broad way of recognizing digital assets that are exchanged using an encrypted distributed ledger. However, tokens, do not function in the same way as coins since they are not easily exchangeable for goods and services, unlike traditional forms of money. An example of this would be ERC-20 tokens.
Since tokens are tied to a specific blockchain entity, their value is derived from the workings of this project. For example, if the underlying blockchain project that issued the token has not garnered much attention from investors, the value of the token will be lower. Therefore, the value of a token is completely dependent on the blockchain with which it is associated.
Although the inner workings of a blockchain can have an impact on the value of coins as well, the prices of these assets are also dependent on other factors. For example, the fact that a coin can easily be exchanged for other crypto or fiat currencies has a major impact on its price. Ultimately, the price of the coin is then determined not just by its own blockchain network, but also in the context of assets for which it can be exchanged.