Tokens
We already saw that every blockchain has its native currency (BTC, ETH, SOL). But on blockchains like Ethereum and Solana, tokens also exist: assets created on top of the existing blockchain.
Native currency vs Token
| Concept | Example | Description |
|---|---|---|
| Native currency | ETH on Ethereum | The "original" currency of the blockchain. Needed to pay for transactions. |
| Token | USDC on Ethereum | An asset created by someone using the blockchain. |
Think of it this way: if Ethereum were a country, ETH would be the official currency (like the dollar in the US), and tokens would be like casino chips or loyalty points that work within that country.
Native currency: ETH — used to pay for gas.
Tokens that live on top: USDC, USDT, LINK, UNI, and thousands more.
Gas Fees
To send tokens you need to pay gas in the blockchain's native currency. For example, to send USDC on Ethereum you need ETH; on Solana you need SOL.
Costs vary a lot between blockchains. See the comparison table in the Blockchain section.
Types of Tokens
Stablecoins
Tokens that hold a stable value, almost always a dollar. These are the ones you'll use most in practice. → Stablecoins
NFTs (Non-Fungible Tokens)
NFTs are unique tokens that represent ownership of something specific:
All identical. A dollar is a dollar; it does not matter which one you get.
Each one different. CryptoPunk #3100 cannot be swapped for #3101.
- Digital art, collectibles
- Tickets, memberships
- Domain names (.eth, .sol)
- Game items
Memecoins
Tokens created for fun, based on memes. Examples: DOGE, SHIB, PEPE, BONK, WIF.
Warning
Memecoins are extremely speculative. Most of them lose all their value. Many are scams ("rug pulls"). Only use money you can afford to lose completely.
Governance Tokens
Tokens that grant the right to vote on protocol decisions. Example: UNI lets you vote on Uniswap proposals.
Tokenized and wrapped assets
Representations of something else within a blockchain:
| Token | Represents |
|---|---|
| wBTC | 1 Bitcoin, held in custody on the Bitcoin network |
| PAXG | 1 ounce of physical gold in a London vault |
| Tokenized stocks | Exposure to the price of a real stock |
A "wrapped" token is an IOU
When you buy "BTC" on a blockchain that isn't Bitcoin, you're not buying Bitcoin: you're buying a token that says someone is holding a Bitcoin for you.
Lives on the Bitcoin network. Depends on nobody.
Lives on another network. Depends on the custodian holding up their end.
It's the same logic as stablecoins: it works great as long as the issuer holds up their end, and the token is worth exactly what that promise is worth.
For operating in DeFi, wrapped is fine. For long-term holding, it's better to hold the native asset. See how to convert it to native BTC.
How to tell if a token is the real one
Anyone can create a token and call it "USDC" or "Wrapped Bitcoin". The name means nothing; the only thing that identifies a token is its contract address.
- Look up the official address on the project's site or on CoinGecko
- Compare it character by character with the one the app shows you
- If they don't match, it's a different token — no matter how identical the name and logo look
This is the check that prevents most losses when buying on a DEX.
Summary
- Tokens are assets created on top of existing blockchains
- To move tokens you need to pay gas in the native currency
- Stablecoins hold a stable value (~$1 USD)
- NFTs are unique tokens (art, collectibles)
- Memecoins are speculative and high risk
If you came looking for something else:Someone's about to send me crypto · I want to cash out to local currency · Start from the beginning