What Are Native Tokens?
The term "native token" is used to refer to a token that is created on a blockchain. In the past, the term was used to refer to the original token made for a blockchain that had an internal use. However, it has since morphed to include any tokens that are made on that blockchain.
A few examples of native tokens are bitcoin, ether, and the stablecoin USDC, created by the now-dissolved Centre partnership between Coinbase and Circle. USDC is native to several blockchains or supporting layers.
Key Takeaways
- Native tokens are the tokens created on a blockchain.
- Examples of native tokens include ether (ETH), bitcoin (BTC), stellar (XLM), and solana (SOL).
- Non-native tokens are created on layers that support blockchain operations or for applications created using that blockchain.
Understanding Native Tokens
When a blockchain is developed, it is generally created to address a specific issue. For instance, the Bitcoin blockchain and its native token, bitcoin, were created to be a payment system, using a reward mechanism as an incentive for securing the blockchain. Ethereum was designed to be a system on which other applications could be designed, using ether as the reward and payment for work done on the blockchain. At the time, and for several years, tokens like these were considered the only ones that could be native tokens.
But it's important to understand that with blockchains and cryptocurrencies, definitions and concepts change over time because they are still being researched and developed. Currently, most people use "native token" to refer to one that is created on a particular blockchain. Its purpose or utility doesn't matter as long as it was minted on that blockchain. A token is non-native if it was not created on a blockchain but is compatible. For instance, Uniswap and its token UNI were created using Ethereum. So, UNI is non-native to Ethereum.
Native Tokens and Forks
The token of a hard-forked blockchain is considered a native token because forking projects generally create a new blockchain and token from the old one. A fork is a change in a blockchain that some users accept but not others. The ones that accept the change run the new blockchain, and the ones that don't accept it run the old version.
The blockchain and token might be replicas of the old chain, but they will be named something different, making the token on that chain a native token because it was minted on the forked blockchain.
Examples of Native Tokens
Notable examples of native tokens are bitcoin (BTC), ether (ETH), Binance Coin (BNB), Cardano’s native token (ADA), and USDC.
USDC is a stablecoin originally created by Coinbase and Circle on the Ethereum blockchain. It is pegged to the dollar with a reserve equal to the amount of circulating USDC (held by BlackRock). By the old native token definition, it was not a native token because it had no internal use on the blockchain. However, the stablecoin is now minted (issued or created) and backed by Circle on many other blockchains, making it one cryptocurrency native to many chains.
As of May 1, 2024, USDC was native to Algorand, Arbitrum, Avalanche, Base, Celo, Ethereum, Flow, Hedera, NEAR, Noble, OP Mainnet, Polkadot, Polygon PoS, Solana, Stellar, and zkSync.
Wrapped bitcoin (WBTC) is a bitcoin that has been tokenized (given a token) on the Ethereum blockchain via a smart contract. A bitcoin is sent to a custodial address controlled by a smart contract, and a WBTC is created on the Ethereum blockchain that represents a 1:1 bitcoin value.
The WBTC can then be used in Ethereum decentralized applications. Once someone wants to convert it back to bitcoin (BTC), it is sent to an address on the Ethereum network that burns the WBTC, and the smart contract transfers the bitcoin back to the owner. This is the same process USDC uses to transfer value—it uses smart contracts to burn the USDC on the Ethereum blockchain and mint a token on the target one.
Is ADA a Native Token?
Yes. ADA is the original token for the Cardano blockchain, which was one of the first blockchains to use proof-of-stake.
What Is a Crypto Native?
The term currently used is native token, which refers to a token that is created (minted) on a specific blockchain.
What Is an Example of a Non-Native Token?
Any token created using the ERC20 fungibility standard on Ethereum can be thought of as a token that is non-native to Ethereum. USDT, USDC, and SHIB are all non-native to Ethereum.
The Bottom Line
Native tokens are created on a specific blockchain or its supporting layers and used for purposes other than for the original blockchain.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimerfor more info. As of the date this article was written, the author does not own cryptocurrency.
FAQs
Native tokens are the tokens created on a blockchain. Examples of native tokens include ether (ETH), bitcoin (BTC), stellar (XLM), and solana (SOL). Non-native tokens are created on layers that support blockchain operations or for applications created using that blockchain.
What is a native gas token? ›
Native Token is a token (Gas) on Japan Open Chain that is paid to the Validator in exchange for the energy to verify the blockchain transactions, creating contracts, and other actions (in general, server fee), usually what is called Gas in the Ethereum world.
What is a native utility token? ›
Native Utility Token, a cryptocurrency with a strong emphasis on utility and incentivizing user participation, has experienced several significant milestones in its development and adoption.
What is the native token of the Cardano blockchain? ›
Cardano supports currencies such as ada and native tokens, which act similarly in the network. However, ada is the principal currency that, at this time, is accepted as fee-payment, to make deposits, and is also the only currency in which rewards are distributed.
What is an example of a token? ›
a memento; souvenir; keepsake: The seashell was a token of their trip. something used to indicate authenticity, authority, etc.; emblem; badge: Judicial robes are a token of office.
What is a coin vs native token? ›
Coins are digital assets that operate on their own independent blockchain. Tokens are digital assets that operate on an existing blockchain network. While coins primarily function as a medium of exchange, tokens aim to offer a wider range of functionalities within a specific project's ecosystem.
Why do I have to pay the gas fee? ›
This fee is paid to validators for finalizing transactions, validating them into blocks, and securing the blockchain. The Ethereum network requires gas to execute transactions. When you send tokens, interact with a contract, or do anything else on the blockchain, you must pay for that computation.
What is native currency? ›
A country's system of monetary exchange; for example, dollars and Euros.
What is Ethereum native token? ›
Ether (ETH) is the native token used by the Ethereum blockchain and network as an internal payment system. ERC-20 is the standard for creating smart contract-enabled fungible tokens to be used in the Ethereum ecosystem.
What is the native token near? ›
NEAR is the native token of the NEAR Protocol, a highly scalable blockchain network that provides a developer-friendly, decentralized application platform. NEAR tokens are used to pay network fees and can be staked to enhance network security.
Cronos (CRO) Crypto.com, recently rebranded to Cronos, is a solid example of the use of utility tokens. Cronos positions itself as an all-in-one cryptocurrency platform for consumers offering services such as exchange, wallet, brokerage, debit cards, borrow/lend, payments, and DeFi.
What is a native digital asset? ›
So in the context of a purely digital ecosystem, a native digital asset can only be one of two things: value held statically at a node in token form, without external backing; or an entitlement, held in token form at a node, to a future flow of tokens.
What is an example of a native token? ›
Examples of Native Tokens
Some examples are the Ethereum blockchain's native token, called Ether (ETH); the Binance Smart Chain, which has a native token called Binance Coin (BNB); and Cardano's native token, ADA.
What is the native token on Solana? ›
Solana (SOL)
The SOL token is the Solana network's native cryptocurrency used to incentivize validators and delegators, pay for transaction fees, and execute custom programs.
What is the native token of polygon? ›
As with Ethereum, it uses a proof-of-stake consensus mechanism for processing transactions on-chain. Polygon's native token is named MATIC. Matic is an ERC-20 token, allowing for compatibility with other Ethereum cryptocurrencies. It is operated by Polygon Labs.
What is the difference between ERC-20 and native token? ›
Ether (ETH) is the native token used by the Ethereum blockchain and network as an internal payment system. ERC-20 is the standard for creating smart contract-enabled fungible tokens to be used in the Ethereum ecosystem.
What is the native token of Metaverse? ›
Metaverse tokens are blockchain-based digital currencies that allow users to participate in Metaverse's economy. Using these tokens, one can purchase everything from virtual land, clothes for your avatar, in-game gear, and digital art, usually NFTs.
What is the difference between wrapped and native tokens? ›
Wrapped tokens are ceated to represent another asset on a different blockchain, allowing that asset to be used in new ways. Regular tokens serve various purposes on their native blockchain, like voting, paying fees, or buying services.
Who are crypto natives? ›
Crypto natives are, electively or through regulation, moving closer to the traditional practices of capital markets – which means they'll also be acquiring technology and expertise to help mature their processes, especially around compliance.
