Day 13 — Tokens, coins, and NFTs (and why the distinctions matter)

People in crypto use these three words almost interchangeably, and most outsiders cannot tell them apart. The differences are not just semantic. They matter for how the assets behave, what they're used for, and how the law sees them.

Let me set the categories clearly.

A coin is the native asset of a blockchain. Bitcoin (BTC) is the native asset of the Bitcoin blockchain. Ether (ETH) is the native asset of Ethereum. SOL is the native asset of Solana. AVAX, NEAR, APT, SUI, ATOM, and so on. Coins are issued by the protocol itself, used to pay transaction fees on their chain, and are typically what miners or validators receive as block rewards.

A token is anything other than a coin that exists on a blockchain. USDC is a token (built on Ethereum and many other chains). Uniswap's governance token UNI is a token (built on Ethereum). Most of the assets you can buy, trade, or interact with on chain are tokens, not coins.

The technical mechanism that makes this work is that smart-contract chains let anyone deploy a contract that defines a new asset. On Ethereum, the most common token standard is ERC-20, which specifies the interface any fungible token should implement. If you build a contract that follows the ERC-20 standard, every wallet and exchange that supports ERC-20 can immediately handle your token. That is why there are tens of thousands of tokens on Ethereum and adding a new one is a couple hours of work.

Fungibility is the property that any one unit is interchangeable with any other. One dollar bill is the same as any other dollar bill (mostly). One bitcoin is the same as any other bitcoin. Most coins and most tokens (ERC-20 and equivalents) are fungible.

Then there's the third category. Non-fungible tokens (NFTs) are tokens where every unit is unique. The standard is ERC-721 (and ERC-1155 for hybrid cases). Each NFT has its own ID, its own metadata, its own ownership history. Two NFTs from the same collection are typically related (same artist, same project, same theme) but each one is distinct.

NFTs went through a hype cycle in 2021-2022 that was, in hindsight, mostly speculative excess on top of a small kernel of genuinely interesting technology. Most of what was sold as a "$200,000 monkey JPEG" was driven by status games, money-laundering opportunities, and pure speculation, and a lot of those NFTs are now worth a small fraction of what they sold for. The crash was deserved.

But the underlying technology is not the hype. NFTs solve a specific technical problem: how do you prove digital ownership of something unique in a world where digital files are infinitely copyable? Before NFTs, the answer was "you can't really, you can only enforce ownership through copyright law and platform agreements." After NFTs, you can have provable, transferable, on-chain ownership of something unique. This is genuinely new, and the right use cases are not jpegs.

The serious use cases for NFTs in 2026 include:

Tokenized memberships and access rights. A club, a podcast, a community, a software license. The NFT is the proof that you have access.
Tokenized event tickets. Anti-counterfeit, transferable, with built-in royalties for the issuer on resale.
Real-world asset titles. A piece of art, a bottle of wine, a watch, a property. The NFT is the digital wrapper for the asset's chain of ownership.
Identity and credentials. A diploma, a license, an attestation of skills or experience. The NFT is the verifiable record.
In-game items and digital property. Items in a game or virtual world that the player actually owns and can take across platforms.
Music royalties and creative ownership. Artists tokenizing rights to their work and selling fractional ownership to fans.

The pattern is consistent. The thing being tokenized is something that is genuinely unique (not interchangeable), has value, and benefits from being transferable and verifiable. Profile-picture NFTs (the monkey-JPEG category) sometimes work and often don't, depending on whether the community sustains itself. The other categories are quieter and more durable.

A few more terms worth knowing.

Token standards. ERC-20 (fungible, Ethereum), ERC-721 (NFT, Ethereum), ERC-1155 (hybrid, can do both, Ethereum), SPL (Solana's token standard, both fungible and non-fungible variants), and similar standards on other chains. The standards matter because they determine what tools can interact with the token.

Memecoins. A category of tokens whose value is primarily driven by community and meme appeal rather than fundamental utility. DOGE, SHIB, PEPE, and the constantly-rotating crop of new memecoins on Solana and Base. Memecoins are gambling instruments dressed up as tokens. Some make people fortunes. Most go to zero. The right framing: this is a casino, and the people who play it well know they're at a casino.

Wrapped tokens. A token that represents an asset from another chain. Wrapped Bitcoin (WBTC) is a token on Ethereum that represents BTC held in custody, allowing Bitcoin holders to use their BTC in Ethereum DeFi. Wrapped tokens introduce a custodian risk (whoever holds the underlying asset) and are slowly being replaced by more trust-minimized bridging.

Governance tokens. Tokens that grant voting rights in a DAO or protocol. UNI for Uniswap, AAVE for Aave, COMP for Compound. The value of a governance token is in theory tied to the value of the protocol it governs. In practice, governance tokens often trade based on speculation about what the protocol might do rather than what it actually does.

Why does this matter for your participation?

Legally, the SEC has been clear (more or less) that some tokens are securities and some are not. Bitcoin is a commodity. Ether is, mostly, a commodity (the SEC has gone back and forth). Most utility tokens have a real chance of being classified as securities, especially if they were sold to investors with the promise of future value. The Howey test (we cover this on Day 24) is the relevant framework. The classification matters because securities are regulated, and selling unregistered securities to US persons has consequences.

Practically, the type of asset determines how you should value it. A coin's value is tied to the chain's usage and economic security. A fungible token's value is tied to the protocol's economics and tokenomics design. An NFT's value is tied to demand for the specific unique asset. These are three different valuation frameworks. Confusing one for another is how people end up holding 100x positions in something they fundamentally misunderstand.

Tomorrow we close out Week 2. Same recap structure as Day 7: a real news scenario decoded, applying everything from Days 8-13 to a working analyst's lens.

Glossary

Term	Definition
Coin	The native asset of a blockchain. BTC, ETH, SOL, etc. Issued by the protocol.
Token	Any asset other than a coin that exists on a blockchain. Created by deploying a smart contract.
Fungible	Property where any one unit is interchangeable with any other. (Dollars, bitcoin, USDC.)
Non-fungible	Property where each unit is unique. (NFTs.)
ERC-20	The most common Ethereum standard for fungible tokens.
ERC-721	The most common Ethereum standard for non-fungible tokens.
ERC-1155	An Ethereum standard for hybrid fungible/non-fungible tokens.
NFT (Non-Fungible Token)	A unique, non-interchangeable token.
Memecoin	A token whose value is primarily driven by community and meme appeal rather than utility. (DOGE, SHIB, PEPE.)
Wrapped token	A token on one chain representing an asset held in custody from another. (WBTC, WETH.)
Governance token	A token that grants voting rights in a DAO or protocol. (UNI, AAVE, COMP.)
Token standard	The technical specification a token follows, enabling compatibility with wallets and exchanges.

Reality check

You see a new project launching a token. What three questions tell you the most about whether the token is worth paying attention to?

There are many valid answers, but a strong set is some version of: (1) Is the token a coin, a fungible utility token, or an NFT, and does that match the project's purpose? (2) What is the token's role in the protocol's economics: does it accrue value from usage, or is it primarily a governance or speculative instrument? (3) What is the token's distribution: who holds it, what's the vesting schedule, and is the founder's allocation reasonable? If you can answer all three for any project, you have a coherent view. If you can't answer them, you don't have enough information to participate.