The distinction people trip over is coin versus token. A coin is native to its network: it pays the fees, helps secure the chain and exists at the protocol level. A token is an entry in a contract's ledger, hosted by that network and paying that network's fees whenever it moves. Send a token and you are still paying in the chain's own coin, which catches out newcomers holding a balance they cannot transfer because they have nothing left for the fee.
Shared standards are what make tokens usable. <a href="/glossary/erc-20/">ERC-20</a> defines a common set of functions for interchangeable tokens, so any wallet or exchange supporting the standard supports every token that follows it without extra work. That interoperability is genuinely powerful, and it is also the reason launching a brand new token is close to effortless.
Tokens do wildly different jobs. Some represent a claim on something else, some grant voting rights as a <a href="/glossary/governance-token/">governance token</a>, some track a currency as stablecoins, some exist purely as a reward for using a protocol, and plenty exist only to be sold. Because deployment is trivial, fake tokens copying the name and logo of a well-known project are everywhere. Check the contract address from an official source rather than a search result, and read how supply is distributed, since a token where a handful of addresses hold most of the supply behaves very differently from a widely held one. That is also where <a href="/glossary/fully-diluted-valuation/">fully diluted valuation</a> becomes worth understanding.
Key takeaways
- Coins are native to a blockchain while tokens are issued by contracts running on one, and tokens still need that chain's coin to move.
- Standards such as ERC-20 make tokens portable across wallets, and equally make creating a worthless one trivially cheap.
- Always verify a token's contract address from an official source, because names and logos are the easiest thing in crypto to copy.
Token — frequently asked questions
Why do I need ETH to send a token on Ethereum?
Because the transfer is a transaction on Ethereum, and Ethereum charges its fee in ether regardless of what you are moving. The token contract only updates balances, but the network still has to include and execute that update. Keeping a small amount of the native coin in any wallet that holds tokens is what avoids a stranded, unmovable balance.
Does holding a token give me ownership of the project behind it?
Usually not. Most tokens carry no legal claim on a company, its assets or its revenue, whatever the marketing implies. Some do confer on-chain voting rights over a protocol's parameters, which is real but narrow. Read what rights the token actually grants in the project's own documentation rather than assuming it behaves like a share in a business.
New to crypto, or filling in the gaps? Work through the essentials in Learn, browse every term A–Z, or see live prices for the coins these concepts power.