Token Chinese interpretation: The fundamental difference from Coin and trading strategies

Why Are Coin and Token Often Confused Long-Term?

In the early days of cryptocurrency development, the industry mainly used the term Coin, with Bitcoin, Litecoin, Dogecoin, and others adopting this name. It wasn’t until the emergence of Ethereum that the concept of Token became more widespread, and the two began to be used interchangeably. Since both are translated into “代幣” or “加密貨幣” in Chinese, many investors find it difficult to distinguish their substantive differences.

What is a Token? The Accurate Meaning of Token in Chinese

Token, commonly referred to as pass, token, or digital token in Chinese, is essentially a digital form representing specific rights, certificates, or assets. It can be traded, transferred, and exchanged on its corresponding blockchain network.

The key feature of a Token is that it is issued based on an existing public chain and does not have its own independent blockchain infrastructure. After Ethereum introduced the ERC-20 standard in 2015, any developer could issue their own Token on it, making Ethereum still the largest public chain in the world for Token issuance. From this perspective, Token is actually a collective term representing all tokens that are not native to a public chain, including DeFi application tokens, Layer-2 solution tokens, NFT-related tokens (such as APE, SAND), and others.

What are the specific classifications of Tokens?

According to the classification framework of the Swiss Financial Market Supervisory Authority(FINMA), Tokens can be divided into three main types:

Payment Tokens(Payment Tokens): These tokens aim to achieve secure, fast, and low-cost payment functions; stablecoins are the most typical example.

Utility Tokens(Utility Tokens): Designed to provide access rights and usage certificates for various applications. Most ERC-20 tokens on Ethereum belong to this category.

Asset Tokens(Asset Tokens): Represent ownership or rights to a project or asset, allowing holders to enjoy value appreciation brought by the token. It is important to note that holding asset tokens does not necessarily mean owning project equity or receiving dividends.

In practice, a single Token often possesses two or even three of these attributes simultaneously. Purely single-category tokens are relatively rare in reality.

What is the fundamental difference between Coin and Token?

The core difference is that Coins have their own independent blockchain infrastructure, while Tokens do not.

Bitcoin runs on the Bitcoin blockchain, and Ether runs on the Ethereum blockchain; they are native assets of their respective networks. In contrast, Tokens are built on existing blockchain ecosystems. This architectural difference directly affects their application ecosystems’ breadth and depth—Tokens usually cannot independently build complex applications.

From multiple dimensions, the differences are as follows:

Invest in Tokens or Coins? Each Has Its Advantages

The choice of investment strategy does not have to be a binary decision. If we consider Coins as foundational infrastructure builders at the public chain level, Tokens are service providers at the application layer— the former solves the underlying issues of blockchain, while the latter develops applications to meet specific needs on this foundation. Both are indispensable, forming a complete ecological cycle.

Compared to Coins, Tokens have greater application scalability and are relatively easier to implement. The value of Coins is often limited to infrastructure optimization; if the project direction fails, there are no other options (such as the decline of Quantum Chain or BiYuan Chain). Tokens, on the other hand, can flexibly adjust business directions and launch new products or services. For example, MakerDAO’s launch of RWA business is a typical case.

More importantly, Token price volatility is usually significantly higher than that of Coins. Tokens like UNI, SNX, MKR often fluctuate more than BTC and ETH, especially during bull markets, creating more trading opportunities for short-term investors. Of course, high volatility also means high risk, so investors should evaluate carefully.

How to Trade Token Tokens? Two Main Approaches Explained

Spot Trading: Hold the Token directly

Spot trading is the most direct investment method, based on actual asset ownership. For example, if the current price of UNI is $3, a buyer paying $3 can obtain full ownership of 1 UNI.

Special Reminder: When trading spot, beware of fake coins with the same name. Some teams copy popular tokens’ names to issue low-value counterfeit tokens, which are not listed on official exchanges, making them difficult to sell after purchase. Therefore, before buying, verify the token contract address on the official website or blockchain explorer to ensure accuracy.

Margin Trading: Leverage to Amplify Returns

In addition to spot trading, Tokens also support margin trading. Most of these trades do not involve actual token transfer, thus avoiding fake coin risks.

Margin trading allows investors to use only part of their funds as collateral rather than paying the full amount. For example, using 10x leverage to go long on UNI at $3, only $0.3 is needed to control a position of 1 UNI. Contracts for difference (CFDs) or U-based contracts are entirely virtual operations, and investors do not hold the actual Token.

Risk Control Tips: Since Token volatility is much higher than Coin, investors should strictly control position sizes and leverage. It is generally recommended not to exceed 10x leverage. Although daily fluctuations of BTC exceeding 10% are quite rare, newly listed Tokens often experience such volatility, and liquidation risks should not be underestimated.

Essential Tips Before Starting Token Trading

Whether using spot or margin trading, the operational process is similar. But the most critical step is choosing a safe trading platform regulated by authoritative institutions. This not only concerns the security of funds but also directly affects trading experience and risk management. Investors are advised to thoroughly understand the platform’s regulatory background, security measures, and user reviews before opening an account to ensure their assets are well protected.