Complete Analysis of Tokens in Chinese: Definition, Classification, and the Fundamental Difference from Coins

What is a Token in Chinese?

In the Chinese context, a Token is usually translated as “pass,” “token,” or “coin,” essentially a virtual product representing specific rights, certificates, or digital assets that can be traded, transferred, and exchanged on the corresponding blockchain network.

In the early development of cryptocurrencies, the market mainly used the concept of Coin to describe digital currencies, such as Bitcoin, Litecoin, Dogecoin. After the emergence of Ethereum, Token and Coin began to be used interchangeably, leading to the Chinese translations of “token” or “cryptocurrency,” which made it difficult for many investors to distinguish the substantive differences between the two.

An important feature of a Token is that it does not have its own independent blockchain infrastructure. Since the launch of the ERC-20 token standard by Ethereum in 2015, any developer can issue Tokens on its network. To date, Ethereum remains the public chain with the largest number of issued Tokens worldwide, with its ecosystem including DeFi, Layer-2 solutions, NFT tokens (such as APE, SAND), and various other forms of Tokens.

The Three Main Categories of Tokens and Their Application Scenarios

According to the official classification by the Swiss Financial Market Supervisory Authority (FINMA), Tokens are mainly divided into three types:

Payment Tokens
These tokens aim to enable secure, efficient, and low-cost payment functions. The most typical examples are various stablecoins, which are pegged to fiat currencies or commodities, providing price stability.

Utility Tokens
Utility tokens provide access rights to various applications, mainly represented by ERC-20 tokens on public chains like Ethereum. Holders can access specific services or functionalities through these tokens.

Asset Tokens
Asset tokens represent ownership or beneficiary rights to a project or asset. Holding such tokens usually means becoming a participant in the project and enjoying the associated value. It is important to note that, unlike traditional stocks, holders generally do not have legal ownership of the company or project, nor do they have dividend rights.

In practice, a Token often possesses two or even three of these attributes simultaneously, making complete categorization difficult.

The Core Difference Between Tokens and Coins

The fundamental difference is: Coins have their own native blockchain. Bitcoin (BTC) runs on the Bitcoin blockchain, Ethereum (ETH) runs on the Ethereum blockchain; these are the native assets of these networks.

In contrast, Tokens do not have their own blockchain, but are built on existing blockchain ecosystems. This results in a Token ecosystem that is usually less extensive than that of Coins, and some Tokens may not even support independent full applications.

Investment Differences Between Tokens and Coins

Both have their advantages, and the choice depends on investment goals.

Infrastructure vs Application Layer
If you consider Coins as public chain cryptocurrencies, Tokens can be understood as application-layer cryptocurrencies. The former mainly addresses blockchain infrastructure issues, while the latter provides various applications or services based on this infrastructure to directly meet user needs. Both are indispensable.

Scalability
Compared to Coins, Tokens are more scalable and easier to implement in terms of applications or services. The value of Coins is limited to optimizing infrastructure; if a project fails, it often cannot pivot, as with the decline of Quantum Chain (QTUM) or Bytom (BTM). Tokens, on the other hand, can offer diversified services, such as MakerDAO’s RWA (real-world asset tokenization) efforts, demonstrating greater flexibility.

Volatility and Risks
Tokens tend to be more volatile than Coins. Tokens like UNI, SNX, MKR often fluctuate more than BTC and ETH, especially during bull markets. Greater volatility creates more opportunities for short-term traders but also entails higher risks. For new project Tokens, caution is needed regarding liquidation risks.

The Two Main Investment Methods for Tokens

Spot Trading

Spot trading involves actual asset transactions with full payment. For example, if the current price of UNI is $3, paying $3 allows the buyer to obtain 1 UNI token, with full ownership transferred.

Risks to watch out for: Beware of fake tokens with the same name. Some development teams issue tokens that are identical in name to well-known tokens but hold no real value, which could lead to being unable to sell after purchase. Before engaging in spot trading, verify the token’s smart contract address via the official website or blockchain explorer.

Margin Trading

Besides spot trading, Tokens can also be traded via margin trading. This type of trading generally does not involve actual token holdings, thus avoiding fake token risks.

Margin trading is a non-full amount trading mode, where investors only need to deposit part of the funds as margin, without paying the full amount to buy tokens. For example, using 10x leverage to go long on UNI (current price $3), only $0.3 is needed to open a position of 1 UNI. In CFD or U-based contracts, traders do not actually hold the native tokens.

Important reminder: Since Token volatility is usually higher than Coins, investors should carefully control position sizes and leverage. It’s best not to exceed 10x leverage, especially for newly issued tokens. While BTC can fluctuate 10% in a day, such volatility is much more common for Tokens, especially new coins, increasing the risk of liquidation.

Regardless of the trading method chosen, the primary consideration is to select a secure and regulated trading platform, which is the fundamental safeguard for Token investment.