Token
A digital asset created on an existing blockchain rather than its own native chain. Tokens can represent a wide range of assets and utilities — from currency and governance rights to real-world assets and collectibles. Unlike coins (BTC, ETH) which are native to their blockchain, tokens are created using smart contracts on platforms like Ethereum (ERC-20, ERC-721).
“USDC is a token on Ethereum that represents a US dollar. UNI is a governance token that grants voting rights in the Uniswap protocol. Both run on Ethereum, not their own blockchain.”
ERC-20
The most widely adopted token standard on Ethereum, defining a common set of rules that all fungible tokens must follow. ERC-20 specifies six mandatory functions (like transfer, approve, and balanceOf) that ensure any compliant token can be seamlessly used across wallets, exchanges, and DeFi protocols without custom integration.
Smart Contract
Self-executing programs stored on a blockchain that automatically enforce the terms of an agreement when predetermined conditions are met. Smart contracts enable trustless transactions without intermediaries because the code, once deployed, executes exactly as written and cannot be altered (unless specifically designed to be upgradeable). They form the foundation of DeFi, NFTs, DAOs, and virtually all dApps.
Token Standard
A set of rules defined in a smart contract interface that tokens must implement to be compatible with the broader ecosystem of wallets, exchanges, and dApps on a blockchain. Standards ensure interoperability — any application built to support a standard automatically works with all tokens following it. Major Ethereum standards include ERC-20 (fungible), ERC-721 (NFT), and ERC-1155 (multi-token).
Cryptocurrency
A digital or virtual currency that uses cryptography for security and operates on a decentralized network, typically a blockchain. Unlike traditional currencies issued by governments, cryptocurrencies are not controlled by any central authority and use consensus mechanisms to validate transactions and maintain the integrity of the ledger.