What Is a Coin?

What Is a Coin?

A coin is a small flat round piece of metal, used as money to pay for goods and services. Coins are made of gold, silver or other precious metals, or base metals such as copper and nickel. The value of a coin depends on its condition, specific historical significance, rarity, beauty of the design and general popularity with collectors. The metal content of a bullion coin also influences its value, but the face value of a circulating coin is largely irrelevant.

In the United States, coins can be minted with faces valued at less than their precious metal content. This practice, known as debasement, allows the minting authority to produce more coins than would be possible if they were made of pure metal. Debasement is typically accompanied by price inflation.

The Mint designs most circulating coins by drawing a sketch of what they want the coin to look like (1). The artist then uses the sketch to sculpt a 3-D clay or digital model (2), from which they create a stamp (or die) (3) that will be used to stamp the coin with its design. The die is then made of the same metal as the coin, and the stamped image is rolled into a coil (4). The resulting coin can last up to 30 years in circulation before it becomes too worn down to use anymore. It can then be taken out of circulation and melted down for other purposes, or saved in a piggy bank.

Most coins are circular in shape, but they can be made in a variety of other shapes. Some have flat sides, while others have wavy edges (for example the Australian 50-cent coin has twelve flat sides). Coins can even be square or polygonal, as is the case with the Chinese 10 cent coin and the Swazi 5 cent coin.

Traditionally, the obverse of a coin has carried an image of a monarch or other authority, while the reverse has various types of information including the year of minting. In some countries, the date is shown on both sides of a coin. A coin can carry multiple denominations, but in most cases one side of a coin shows the monetary unit while the other shows the country and year of minting.

Coins are different from tokens, which are used to pay for transactions on blockchain networks. Tokens are often associated with a project or protocol, and they can offer a wide range of functionalities. Creating a new coin requires building a blockchain from scratch, but tokens can be created on existing blockchains and are thus easier to create.

Coins and tokens are both cryptocurrencies, but they serve different purposes. A coin is a cryptocurrency native to a specific blockchain system, and it’s typically used as the primary medium of exchange within that network. For example, Bitcoin is a coin, as are Ethereum and other cryptocurrencies based on the Ethereum platform. By contrast, some platforms allow you to create tokens — cryptocurrencies that are dependent on the operation of their parent blockchain and would stop working if the platform ever shut down.