Native coins vs tokens: what is the difference?

In everyday talk, people use the two words for anything a wallet holds. Technically, the difference is where the asset lives, and that shapes what you can do with it.

What are native coins and tokens?

A native coin is the built-in currency of its own blockchain. Bitcoin is the native coin of the Bitcoin network. A token is a digital asset created on top of an existing blockchain rather than being that chain's own currency.

How are they created and run?

A native coin follows the rules its own protocol sets for issuing units and agreeing on new blocks. Most tokens are created by a project that puts a smart contract on a host chain. That program runs on the chain and holds the token's rules. Colored coins took another route: proposed on Bitcoin in 2012, they used a mark on ordinary bitcoin transactions instead.

Where are they used?

A native coin moves on its own network, while a token moves on the host chain where it was issued. A deposit has to match what the receiving service expects. A token sent over a network the service does not support may not be credited.

• Check the network name before you send.
• A coin deposit usually needs that coin's own network.
• A token deposit usually needs its host chain.
• A wallet usually shows a token under its host chain.

What risks does each carry?

The risk sits with whatever does the work. A native coin depends on the health of its network, so an attack or a protocol flaw can affect everyone who holds it. A token depends on its own code and on its issuer, so a contract bug or an issuer that walks away can hurt the token even while the chain runs fine.

Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.