In cryptocurrency, a token is a digital asset that is issued and managed on top of an existing blockchain, as opposed to a coin, which is the native currency of its own blockchain (e.g. ETH on Ethereum, SOL on Solana). Tokens leverage the security and infrastructure of their host chain and are created via smart contracts following a standard — most commonly ERC-20 for fungible tokens and ERC-721 for NFTs on Ethereum. Nearly all DeFi protocols, governance systems, utility schemes, and memecoins are tokens rather than coins.
Token categories matter for understanding purpose and risk: Utility tokens — grant access to a product or service (e.g. FIL for Filecoin storage, LINK for oracle services); value is tied to protocol usage; Governance tokens — give holders voting rights over a protocol’s parameters and treasury (e.g. UNI, AAVE, MKR); can be valuable but are also often sold by recipients, creating sell pressure; Security tokens — represent real-world assets or company equity; heavily regulated under securities law; Stablecoins — tokens pegged to a fiat currency (e.g. USDC, DAI); LP tokens — issued by liquidity pools to represent a share of the pool; Wrapped tokens — representations of another asset on a different chain (e.g. WBTC = Bitcoin on Ethereum); Memecoins — tokens with no technical utility, value driven purely by community and speculation. Token issuance is technically trivial — anyone can deploy an ERC-20 in minutes — which is why the vast majority of the ~20 million tokens in existence are worthless or outright scams. Research the team, tokenomics, and use case before investing.
Example: Uniswap’s UNI token is an ERC-20 governance token on Ethereum. Holding UNI gives you the right to vote on protocol parameters like fee switches and treasury spending — but does not automatically entitle you to a share of protocol revenue (though holders have voted to change this).
Learn more: Ethereum.org — ERC-20 Token Standard
