What Is a Crypto Token? Definition, Types and Coin vs Token
A crypto token is a digital asset created by a smart contract on an existing blockchain. Learn the main token types, standards and how tokens differ from coins.
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A crypto token is a digital asset created by a smart contract on an existing blockchain. Unlike a coin, a token does not have its own network. It lives on a host chain such as Ethereum, Solana or BNB Chain, and transfers are paid for with that chain's coin.
Key takeaways
- Tokens are issued by smart contracts, not by running a new blockchain.
- Anyone can create a token, so verifying the contract address matters.
- Common types: stablecoins, governance, utility, wrapped, meme tokens and NFTs.
- Token standards such as ERC-20 and SPL let wallets and exchanges support tokens uniformly.
- Moving a token requires gas paid in the host chain's coin.
How tokens work
A token is a smart contract that keeps a balance sheet: which address owns how many units. When you "send" a token, you ask the contract to update that balance sheet. Because the contract runs on the host blockchain, the transaction is secured by that chain and paid for in its coin.
Token standards
| Standard | Blockchain | Type | Examples |
|---|---|---|---|
| ERC-20 | Ethereum and EVM chains | Fungible | USDC, UNI, LINK |
| ERC-721 | Ethereum and EVM chains | Non-fungible (NFT) | Digital collectibles |
| ERC-1155 | Ethereum and EVM chains | Mixed | Gaming items |
| SPL | Solana | Fungible and non-fungible | USDC on Solana, JUP |
| BEP-20 | BNB Chain | Fungible | ERC-20 equivalent on BNB Chain |
Types of tokens
- Stablecoins: track a reference asset, usually the US dollar (USDT, USDC). They are the main quote currency for crypto trading and for perpetual futures margin.
- Governance tokens: give holders voting power over a protocol (UNI for Uniswap).
- Utility tokens: pay for or unlock a service within an application.
- Wrapped tokens: represent another asset on a different chain, such as WBTC, which is Bitcoin on Ethereum.
- Liquidity provider (LP) tokens: receipts for funds deposited into a DEX pool.
- Meme tokens: community-driven tokens with little or no utility, often extremely volatile.
- NFTs: non-fungible tokens, where each unit is unique.
Coin vs token
| Coin | Token | |
|---|---|---|
| Has its own blockchain | Yes | No |
| Pays network fees | Yes | No |
| How it is created | New network launch | Smart contract deployment |
| Examples | BTC, ETH, SOL | USDT, UNI, WBTC |
Why tokens matter for arbitrage
The same token often trades on many venues at once: centralized exchanges, and DEXs on several chains. Prices drift apart when liquidity is thin or when moving tokens between venues is slow or expensive. That gap is the basis of CEX-DEX and DEX-DEX arbitrage. It is also why checking the contract address matters: two tokens can share a ticker and be completely different assets.
Frequently asked questions
- What is a token in crypto?
- A token is a digital asset created by a smart contract on an existing blockchain such as Ethereum or Solana. It can represent money (stablecoins), voting rights (governance tokens), access to a service (utility tokens) or a unique item (NFTs).
- What is an ERC-20 token?
- ERC-20 is the standard interface for fungible tokens on Ethereum and EVM-compatible chains. It defines functions such as transfer and balanceOf so that wallets and exchanges can support any ERC-20 token the same way.
- Can the same token exist on multiple blockchains?
- Yes. Tokens such as USDT and USDC are issued natively on several chains, and others are moved between chains with bridges. Always check the contract address and network before sending tokens.
- Do I need the blockchain's coin to send a token?
- Usually yes. Sending an ERC-20 token on Ethereum requires ETH to pay gas, and sending an SPL token on Solana requires SOL.