If you have already read the article “What Is an NFT and Why Are People Willing to Spend Millions on a Digital Image?”, you likely have a basic understanding of what NFTs are and why these unique digital assets hold value.

However, in the blockchain world, besides NFTs, there are two other concepts that beginners often encounter: tokens and coins.

So how exactly are NFTs different from tokens and coins? Let’s break down the distinctions in the article below.

1. What Are NFTs, Tokens and Coins?

For newcomers to blockchain, it’s common to confuse these three concepts: NFTs, tokens, and coins.

Although they are all digital assets built on blockchain technology, each type has its own characteristics and use cases.

A coin is the native currency of its own blockchain. For example, Bitcoin (BTC) operates on the Bitcoin network, while Ether (ETH) belongs to the Ethereum network. Coins are mainly used for payments, storing value or covering transaction fees.

A token is created on top of an existing blockchain. For instance, USDT can be issued on Ethereum. Tokens usually represent a utility, an asset or a right within a specific project.

An NFT (Non-Fungible Token) is a non-replaceable, unique token. Each NFT has a distinct identifier and is often used to certify ownership of digital artworks, in-game items, event tickets and other unique assets.

2. Key Differences

Here are the most essential distinctions:

Fungibility

Coins and tokens are interchangeable - 1 ETH is always equal to another 1 ETH.

In contrast, each NFT is completely unique and cannot be exchanged on a one-to-one basis.

Underlying network

Coins operate on their own blockchain (e.g., Bitcoin, Ethereum).

Tokens and NFTs, however, are issued on top of existing blockchains such as Ethereum, BNB Chain or Polygon.

Function

Coins are used for payments or as a store of value.

Tokens represent utilities or assets within a project.

NFTs validate ownership of unique digital items.

Examples

Common coins: BTC, ETH, BNB

Popular tokens: USDT, UNI, AXS

Famous NFTs: Bored Ape Yacht Club, Azuki, CryptoPunks

3. Why Does This Distinction Matter?

Understanding the differences between NFTs, tokens and coins helps you:

Make smarter investments: Know exactly what type of asset you’re holding and its potential.
Avoid value confusion: Don’t mistake an NFT for a typical coin or token.
Participate effectively in projects: Understanding tokenomics allows you to better evaluate a project’s long-term prospects.

4. Conclusion

NFTs, tokens, and coins are all essential pieces of the blockchain ecosystem.

If coins are “money” and tokens are “access passes” then NFTs are “ownership certificates” for unique digital items.

By understanding these distinctions, you’ll be better equipped to explore the blockchain world and avoid common mistakes when investing or participating in Web3 projects.