A coin is a digital asset or cryptocurrency unit that operates independently on its dedicated blockchain, which is considered a currency in a particular financial system. Although often used interchangeably, a token is distinct from a coin — coins use their own native blockchain platform, while tokens are built on an existing blockchain and used in new ones.
Bitcoin is undoubtedly the most popular example of a coin built on its dedicated blockchain. Serving as a payment method with every transaction stored in a decentralized, distributed ledger and a system that ensures no new unit of the coin is created without executing extensive and rigorous computational solutions.
Tokens are built on other blockchains and are mostly issued during ICOs to raise funds for a new crypto project. Typically, a blockchain company yet to build its own dedicated blockchain will issue out tokens built on another blockchain in exchange for cryptocurrencies such as Bitcoin, Ethereum, etc., or fiat currencies in some cases.
What Is an ICO?
Initial Coin Offerings (ICOs as they are popularly called) is a form of crowd-funding usually done by companies and start-ups in the blockchain industry to raise funds for a crypto-project in exchange for a digital asset (tokens) built on an existing blockchain such as the ERC-20. A large number of ICOs are hosted on the Ethereum blockchain (ERC-20)
However, with little or no regulatory supervision, ICOs are highly risky investments, and they are a common ground for scammers and criminals.