In the ever evolving world of blockchain, numerous entrepreneurs and startups find themselves at the crossroads — where they are to make that all important decision of whether to go-ahead and launch a new-bee cryptocurrency or simply create a token on an existing blockchain.
The approach you take can affect the technical foundations of your project, financial strategy, investor appeal, and long-term sustainability. Knowing the difference between cryptocurrencies and tokens is key to any founder making an entrance into the Web3 space where adoption of blockchain is happening in diverse industries, from supply chains, to healthcare, gaming and finance.
In this post we will compare the main differences, advantages and disadvantages as well as use cases between tokens and custom cryptocurrencies to help you decide which is the best option for the goals of your startup.
A custom cryptocurrency is a digital currency that has been developed on its own blockchain. Consider Bitcoin, Ethereum and Litecoin. These are not just tokens — they are new digital currencies that run on their own decentralized ledgers which are created using ‘blockchain technology’.
Creating a cryptocurrency typically involves:
In other words, a cryptocurrency means owning the foundation and the currency — you build your own nation, complete with holdings, government and subjects.
A token is a digital asset that is developed on an existing blockchain. Instead of building a blockchain from the ground up, you make use of an established blockchain ecosystem such as Ethereum, Binance Smart Chain, Solana, or Polygon.
For example:
Tokens can represent:
In other words, setting up a token is faster, cheaper and easier than creating an entirely new cryptocurrency.
Here’s a breakdown to help you visualize the contrasts:
| Feature | Custom Cryptocurrency | Token on Existing Blockchain |
| Blockchain | Independent blockchain | Built on another blockchain (Ethereum, BSC, etc.) |
| Development Cost | High (requires full blockchain build) | Low (smart contract deployment) |
| Time to Market | Long (months to years) | Short (weeks to months) |
| Security Responsibility | Full responsibility (must secure entire network) | Inherited from host blockchain |
| Scalability | Depends on blockchain design | Benefits from parent blockchain scalability |
| Ecosystem | Starts from zero | Leverages existing ecosystem |
| Regulatory Complexity | Higher | Moderate |
| Examples | Bitcoin, Ethereum | USDT, SHIB, UNI |
Full Control Over Blockchain
You design consensus, block rewards, governance and network parameters.
Brand Credibility
Having your own blockchain is one way to make your startup seem more innovative and autonomous.
No Dependency on Host Chain
You’re not dependent on the technical limitations or fee structures of Ethereum or other chains.
Scalability Potential
You can design your blockchain to address specific use cases (e.g., quick micropayments or supply-chain systems).
Long-Term Vision
If you want to develop your own ecosystem (such as Ethereum or Solana), a cryptocurrency gets you there.
Community Development
You can involve other developers in the community to build on your native blockchain.
High Development Costs
Developing a blockchain must be implemented by a skilled team of developers and requires security audits and infrastructure costs.
Custom Cryptocurrency: $35,000 – $2,50,000+ (complexity, audits, infrastructure etc.)
Longer Time to Market
It can take months or years to design, code and secure a blockchain.
Adoption Challenges
Without an ecosystem, your cryptocurrency might struggle to gain traction.
Security Risks
You have to defend your blockchain from being hacked from experiencing an attack.
Regulatory Burden
Governments may regulate cryptocurrencies more heavily than tokens.
Faster Development
It can take days or even weeks to launch an ERC-20 or BEP-20 token.
Lower Cost
No need to construct an entire blockchain — you can instead deploy a smart contract.
Built-in Ecosystem
Immediately access wallets, exchanges, DeFi protocols, and developer communities.
Security Inheritance
The tokens lean on the security of established blockchains, such as Ethereum.
Flexibility
This can cover anything: utility, governance, assets or NFTs.
Limited Control
Your project depends on the parent blockchain’s speed, fees, and upgrade schedule.
Transaction Fees in Native Tokens
Every transaction must be paid in the native blockchain currency (e.g., ETH for Ethereum, BNB for BNB Chain), not your own token. This can create a barrier for users.
Network Congestion
When the parent blockchain is overloaded, your token suffers high gas fees and slower performance.
Competition
With thousands of tokens in existence, standing out requires strong marketing and community building.
Regulatory Risks
Depending on design, tokens may be classified as securities and subject to regulation.
Scalability Limits
Your token inherits all scalability challenges of the host blockchain.
Creating a cryptocurrency from scratch might be something that makes sense if your startup:
Example: If you are building a new decentralized internet (like Polkadot) or a blockchain designed for gaming or IoT, then a custom cryptocurrency makes sense.
A token is the best option if your startup:
Example: If you’re building a DeFi protocol (think Aave), gaming NFT marketplace, or DAO governance system, a token makes sense.
This contrast is why most startups begin with tokens and only switch to building custom cryptocurrencies when and if they achieve scale.
The choice between custom cryptocurrency vs token is determined by your startup’s vision, resources, and timing.
If you desire freedom, scalability, and full control—and you have the budget to sustain them—create a custom cryptocurrency of your own.
If you value speed, cost efficiency, and an already developed ecosystem, a token is the smarter way to go.
For the majority of startups, launching a token is the best way to test markets, raise funds, and gain adoption before needing a full blockchain. But if your master plan is to reinvent an entire industry with a custom blockchain, a cryptocurrency may be worth the extra investment.
What separates a cryptocurrency from a token?
A cryptocurrency has its own blockchain, while a token doesn’t.
Which one is more cost-effective to launch: a token or a custom coin?
A token is significantly cheaper, usually less than $10,000, and a custom coin can cost hundreds of thousands.
Can a token turn into a cryptocurrency eventually?
Yes, projects like Binance Coin were originally tokens before moving onto their own blockchain.
What’s better for fundraising, a coin or a token?
The launch is faster and the costs are lower for tokens, so they are better for fundraising (like ICOs, IDOs).
Are tokens less secure than cryptos?
Not quite — tokens are as secure as their host blockchain.
Are all tokens built on Ethereum?
No, tokens can be issued on Ethereum, Binance Smart Chain, Solana, Polygon, Avalanche and more.
What’s more scalable: custom crypto or tokens?
It depends — a well-designed blockchain scales better, while tokens inherit the scalability of the blockchains they ride on.
How long does it take to release a cryptocurrency?
This can take months to years, depending on complexity. Tokens can be up and running in days to weeks.
Do startups require permission to offer tokens?
In many countries, yes — tokens could be classified as securities, requiring compliance.
What should my startup prefer: custom cryptocurrency or a token?
If you need speed and cost effectiveness, launch a token. If you have a long-term blockchain vision and funding, go for a cryptocurrency.
