Have you ever wondered what the difference is between coins and tokens? The two terms look confusing and sometimes might be assumed to mean the same thing. While starting my crypto journey, I was kind of confused about what the two terms meant and what they individually stood for. However, in my quest to know more, I got their difference and would love to share.

Picture it this way. Assuming you own a large piece of land with your building on it and you want to rent some portions for anyone interested in erecting a building. So anyone who wants to build on the land comes to seek your permission and your approval. In this case, your building is like a coin, while everyone else's buildings on the land are tokens.

Note, people might want to build on your land because of the advantages like constant power supply, safety, and good road connections among others.

With this overview, let's dive deep to discover coins and tokens.

What Are Coins?

Coins are cryptocurrencies that are built and run on their blockchain. They are the native token of their blockchains.

Examples of coins and their blockchain

BTC is built on the Bitcoin Blockchain;

SOL is built on the Solana Blockchain;

ETH is built on the Ethereum Blockchain;

BNB is built on the Binance Blockchain.

What Are Tokens?

Tokens are cryptos that are built and run on another blockchain. They have no blockchain of their own hence they utilize the smart contract of another blockchain to offer their service.

Examples of Token and the blockchain built on

Tether (USDT) is built on the Ethereum Blockchain;

BONK is built on the Solana Blockchain

COQ is built on the Avalanche Blockchain

What Are The Differences Between Coin And Token?

1. Coins are the native currencies of the blockchain they are built on, while tokens are built on a different blockchain.

2. Coin is the only native token of a blockchain, while multiple tokens can be built on a single blochain.

3. Coins were created initially to replace fiat currency while tokens are created for utility, governance, security, and digital assets like NFTs among others.

Why Do Developers Want To Build on Existing Blockchains?

Building tokens on existing blockchain projects offers several advantages:

1. Established Infrastructure: Existing blockchain projects provide a robust and secure infrastructure. Leveraging established platforms like Ethereum or Binance Smart Chain means developers can benefit from the security, decentralization, and scalability features already built into these networks.

2. Interoperability: Tokens built on popular blockchain platforms can easily interact with other decentralized applications (DApps) and smart contracts within the ecosystem. This interoperability enhances the utility and potential use cases for tokens, fostering a more interconnected and versatile blockchain environment.

3. Community and Network Effects: Major blockchain projects have large and active communities. By building tokens on these platforms, developers can tap into existing user bases, gaining visibility and potential adoption for their tokens. This can lead to increased liquidity and trading opportunities on well-established cryptocurrency exchanges.

4. Developer Tools and Resources: Established blockchain platforms often provide a wide range of developer tools, documentation, and resources. This can significantly streamline the token creation process, making it more accessible for developers and reducing the learning curve associated with building on a new or less-developed blockchain.

5. Security and Auditing:Well-known blockchain networks undergo rigorous security testing and auditing processes. By building on these platforms, developers can benefit from the enhanced security measures and scrutiny that these networks receive, reducing the risk of vulnerabilities and potential exploits.

6. Ecosystem Support: Popular blockchain ecosystems offer a variety of support services, including wallet integration, explorer tools, and middleware solutions. This support infrastructure can simplify token management and enhance the overall user experience for both developers and token holders.

In the wide realm of the Web3 ecosystem, having an understanding of terms can help you discover hidden opportunities. While coins are unique and are built on their blockchain, multiple tokens can be built on a blockchain. The Interoperability, security, and other advantages provided by existing blockchains make a good decision as to why most projects (tokens) developers would want to build on existing blockchains.