What Are Crypto Tokens? ERC-20, NFTs & More

By now you understand blockchains and smart contracts. Today we're tackling one of the most common sources of confusion in crypto: what exactly is a token, and how is it different from a coin?

Coin vs. Token: The Simple Distinction

This trips up almost every beginner, but the rule is straightforward:

Coin — the native currency of its own blockchain. Bitcoin (BTC) lives on the Bitcoin blockchain. Ether (ETH) lives on Ethereum. Solana (SOL) lives on the Solana chain. Each has its own network.
Token — built on top of an existing blockchain using smart contracts. USDC, Uniswap (UNI), and Bored Ape NFTs all live on Ethereum. They don't have their own blockchain — they're programs running on someone else's.

Think of it like this: coins are like sovereign currencies (USD, AUD, EUR). Tokens are like casino chips, loyalty points, or concert tickets — they run within someone else's system.

💡 Why does this matter?

When you send an ERC-20 token on Ethereum, you still pay gas fees in ETH (the native coin). Tokens can't exist without the underlying blockchain's coin to power transactions.

ERC-20: The Fungible Token Standard

ERC-20 (Ethereum Request for Comment #20) is the most important token standard in crypto. It defines a set of rules that every fungible token on Ethereum must follow:

totalSupply() — how many tokens exist
balanceOf(address) — how many tokens an address holds
transfer(to, amount) — send tokens to someone
approve(spender, amount) — let another contract spend your tokens
transferFrom(from, to, amount) — move tokens on someone's behalf (after approval)

Because every ERC-20 token follows the same interface, wallets like MetaMask can display any of them. Exchanges can list them. DeFi protocols can interact with them. It's composability through standardization.

Famous ERC-20 tokens include USDC (stablecoin), UNI (Uniswap governance), LINK (Chainlink oracle), and SHIB (meme coin).

The "Fungible" Part

Fungible means every unit is identical and interchangeable. One USDC is the same as any other USDC, just like one dollar bill is the same as any other dollar bill. This is critical for money-like tokens.

ERC-721: Non-Fungible Tokens (NFTs)

If ERC-20 tokens are like dollar bills, ERC-721 tokens are like original paintings. Each one is unique and has its own identity.

An ERC-721 token has:

A unique token ID — no two are alike within the same contract
An owner — exactly one address owns each token
Metadata — usually a link to an image, video, or other digital content

This is what powers NFTs. When someone "buys an NFT," they're receiving ownership of a specific ERC-721 token ID that points to some digital asset. The blockchain proves provenance and ownership; the art itself is usually stored elsewhere (often on IPFS).

🎨 NFTs beyond profile pictures

While JPEGs got the hype, NFTs have real utility: event tickets, domain names (ENS), gaming items, music royalties, real estate deeds, and membership passes. The standard is the foundation — what you build on it is up to you.

ERC-1155: The Multi-Token Standard

ERC-1155 is the Swiss Army knife of token standards, created by the Enjin team for gaming. It lets a single smart contract manage both fungible and non-fungible tokens simultaneously.

Why does this matter?

Efficiency — one contract instead of deploying separate ERC-20 and ERC-721 contracts
Batch transfers — send 50 different items in a single transaction (huge gas savings)
Semi-fungibility — a token can start fungible (e.g., a concert ticket class) and become non-fungible (e.g., after the event, each ticket becomes a unique souvenir)

Gaming is the primary use case. Imagine a game where you have 100 gold coins (fungible), 5 health potions (fungible), and 1 legendary sword (non-fungible) — all managed by one ERC-1155 contract.

Beyond Ethereum: Tokens on Other Chains

Ethereum pioneered token standards, but other blockchains have equivalents:

Solana — SPL tokens (similar to ERC-20)
BNB Chain — BEP-20 tokens (literally a fork of ERC-20)
Polygon, Arbitrum, Optimism — use the same ERC standards (they're Ethereum-compatible)

The concept is universal; the implementation details vary.

How Tokens Are Created

Anyone can create a token. Seriously — deploying a basic ERC-20 contract costs a few dollars in gas and takes about 10 lines of Solidity code (using OpenZeppelin libraries). This is both powerful and dangerous.

Powerful because it democratizes finance. A community can launch a governance token, a startup can tokenize equity, an artist can mint NFTs — without permission from anyone.

Dangerous because scammers exploit this constantly. Rug pulls, fake tokens mimicking real ones, and worthless meme coins are everywhere. Just because something is a token doesn't mean it has value.

🚨 Token Safety Tips

Always verify the contract address of a token before buying. Use CoinGecko or CoinMarketCap to find the official address. Never buy tokens promoted only in Telegram groups or Twitter DMs. And remember: listing on a DEX requires zero vetting — anyone can list anything.

The Token Economy

Tokens have enabled entirely new economic models. Governance tokens let holders vote on protocol decisions. Utility tokens grant access to services. Stablecoins track fiat currencies. Liquidity provider tokens represent your share of a DeFi pool.

Understanding tokens is essential because they're the building blocks of everything else in crypto — from DeFi to DAOs to the metaverse.

🔑 Key Takeaways

Coins have their own blockchain; tokens are built on existing blockchains via smart contracts
ERC-20 = fungible tokens (interchangeable, like money)
ERC-721 = non-fungible tokens (unique, like collectibles)
ERC-1155 = multi-token standard (both fungible and non-fungible in one contract)
Anyone can create a token — always verify contract addresses before buying