What is the Chinese term for Token? How is it distinguished from Coin? An overview of investment strategies

First, Understand the Basics: The Fundamental Difference Between Coin and Token

Before diving into Token investment, it is essential to understand the fundamental distinction between Coin and Token. Coins have their own independent blockchain networks, such as Bitcoin (BTC) running on the Bitcoin chain, and Ether (ETH) running on the Ethereum chain. They are the native assets of these networks, classified as Layer-1. In contrast, Tokens do not have their own blockchain but are built on existing blockchain ecosystems, usually belonging to Layer-2 or Layer-3.

Historically, early cryptocurrencies were collectively called Coins (e.g., Bitcoin, Litecoin, Dogecoin). It wasn’t until 2015, when Ethereum introduced the ERC-20 token standard, that anyone could issue Tokens on Ethereum, leading to the mixed usage of Coin and Token. Both are translated as “tokens” or “cryptocurrencies” in Chinese, which has caused confusion among many investors.

Chinese Definition and Core Features of Tokens

Token, commonly translated as Pass, Token, or Coin in Chinese, is a form representing specific rights, certificates, or digital assets. It can be traded, transferred, exchanged, and operated on the corresponding blockchain.

Token is a general term, not the name of a specific token. Simply put, non-public chain tokens are all considered Tokens, including DeFi tokens, Layer-2 ecosystem coins, NFT tokens (such as APE, SAND), etc. As of now, Ethereum remains the blockchain with the largest issuance of Tokens.

The Three Main Categories and Application Scenarios of Tokens

According to the standards of the Swiss Financial Market Supervisory Authority (FINMA), Tokens can be divided into three categories:

Payment Tokens: Mainly aimed at enabling secure, efficient, low-cost payments. Typical examples are stablecoins.

Utility Tokens: Designed to provide access passes for various applications, mainly ERC-20 tokens on Ethereum.

Asset Tokens: Serve as asset-backed services for project development. Holding such tokens means becoming a part of the project and enjoying the token’s value, similar to stocks. Note that holders in the crypto space usually do not own the company or project ownership, nor do they have dividend rights.

Theoretically, Tokens are divided into three types, but in practice, it is difficult to clearly categorize them, as a single Token often possesses two or even three of these attributes simultaneously.

Comparison of Functions and Attributes of Coin and Token

Investment Choices: Token or Coin?

Both have their advantages; neither is dispensable. Coins can be viewed as public chain cryptocurrencies mainly solving infrastructure issues; Tokens are application-oriented cryptocurrencies, developed on top of the infrastructure to create various applications and services that directly meet user needs.

In comparison, Tokens have greater scalability and easier implementation. The value of Coins is limited to infrastructure optimization, and failure often leaves no alternatives (e.g., Quantum Chain QTUM, BTM). Tokens, on the other hand, can offer diversified services or applications (such as MakerDAO’s RWA business), providing more flexibility.

More importantly, the volatility of Tokens is often greater than that of Coins. Tokens like UNI, SNX, MKR tend to fluctuate more than BTC and ETH, especially during bull markets. This creates more opportunities for short-term investors but also involves higher risks.

Token Investment Methods: Spot and Margin Trading

Spot Trading of Tokens

Spot trading is based on full assets of actual holdings. For example, if UNI is currently priced at $3, buying one UNI for $3 grants ownership of that token.

Key warning: Be cautious of fake tokens in spot trading. For instance, if Team A issues a valuable ABC token, and Team B then issues a same-named ABC token that is not listed on any exchange, buying it may result in being unable to sell. Therefore, before trading, verify the token’s contract address via the official website or blockchain explorer.

Margin Trading of Tokens

Besides spot trading, Tokens can also be traded via margin trading. This type of trading usually does not involve actual token holdings, avoiding the fake token risk mentioned above.

Margin trading is not full-asset trading, requiring only a portion of assets as collateral. For example, using 10x leverage to go long on UNI (currently $3), you only need $0.3 to hold a position of 1 UNI. In contracts for difference (CFD) or U-based contracts, investors do not actually hold the native tokens.

Leverage risk must be emphasized: Due to the high volatility of Tokens, position size and leverage should be controlled, with leverage ideally not exceeding 10x. Emerging tokens are especially volatile, and liquidation risk should not be underestimated.

Practical Steps for Token Trading

Taking DeFi token UNI as an example, here is the trading process on a platform:

Step 1: Register and Log In
Visit the trading platform’s official website, click 【Log In】; if you do not have an account, click 【Create Account】 to register.

Step 2: Search for the Target Token
Enter 【UNI】 in the search box, and a 【Uniswap】 popup will appear; click to enter.

Step 3: Set Trading Parameters
Fill in the parameters according to your needs, including buy or sell direction, trading type, quantity, leverage, stop-loss and take-profit prices. After completing, click 【Confirm】 to place the order.

A simple three-step process: Register → Deposit → Discover opportunities and place orders. Choosing a platform that is secure and regulated by authoritative institutions is a crucial prerequisite for starting Token investment.