Coin
“Coin” is a term that is originally used to refer to a currency in its physical sense. In the crypto sector, the definition of coin is digital currency native to a blockchain, which is why a coin is also called a Layer 1 token. Cryptocurrencies, in general, are divided into coins and tokens. The first difference between them concerns the blockchain on which these two different types of digital currencies are created. When developers decide to release a blockchain, the cryptocurrency originating from this blockchain is a coin. Some examples of coins are ETH which comes from the Ethereum blockchain, SOL from Solana, AVAX from Avalanche. If developers instead intend to create a crypto for their project without building a new blockchain, they can use an existing third-party chain. In this case, the cryptocurrency is said to be a token: although they are bound to a blockchain, they only contribute to the development of their project. The most famous example of a token is the ERC-20 type, the token based on the Ethereum standard of the same name. Tokens are typical of dapp and DeFi protocols, some of the best known being SAND, BAT, YFI.
A coin is thus independent of other blockchains (and other coins) and has its own economic system. Bitcoin is the first coin to have been created, born in 2009 from Satoshi Nakamoto’s code.
By definition, a coin also differs from a token in its functionality. While a coin performs the functions of a currency (medium of exchange, unit of account, store of value), a token can be used for different purposes. In general, a token with a specific function is called a utility token: they are used to perform transactions in dapps, others to manage the governance of a project, or to access services in a crypto ecosystem (such as the Young token, YNG). NFTs are also tokens, specifically non-fungible tokens. There is a third type of tokens, called security tokens, which differ from utility tokens in that they are shares or securities issued by a company, essentially to allow one to participate in its profits.
The term “coin”, as well as “token”, is also used to refer to a single unit of a cryptocurrency. When you are asked to pay 2 ALGOs, you are paying 2 coins. The circulating supply indicates the number of coins circulating in the market, the market cap on the other hand is the total value of all coins in circulation, which is obtained by multiplying the price of the coin by the circulating supply.
Coins can be distributed through ICOs or IEOs. An ICO is defined as an ‘initial coin offering’, i.e. a fundraising campaign initiated by a project before launching its cryptocurrency. ICOs consist of sales of cryptocurrencies (coins or tokens) to users interested in the project, which presents its business plan and mission through whitepapers. Ethereum ICOs spread this practice: they were widely used in the period between 2014 and 2018 but, due to their limitations, were replaced by IEOs. IEOs share the objective of ICOs but are managed by exchanges that act as intermediaries between projects and users.
