What Are Native Tokens?

What Are Native Tokens? The term "native token" is used to refer to a token that is created on a specific 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 Centre, a partnership between Coinbase and Circle. USDC is native to several blockchains or supporting layers. KEY TAKEAWAYS Native tokens are the tokens on a blockchain created originally for that blockchain. Native tokens can also be additional tokens created on a blockchain. Examples of native tokens include ether (ETH), bitcoin (BTC), stellar (XLM), and solana (SOL). Non-native tokens are not created on a specific blockchain but can be used on it. 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 for work done for the blockchain. At the time, and for several years, tokens like these were considered native tokens. But it's important to understand that with cryptocurrency, definitions and concepts change over time because it is still in its infancy. As of December 2023, a native token is one that is created and stored on a particular blockchain. Its purpose or utility doesn't matter as long as it was minted on that blockchain. A token that wasn't minted on a specific blockchain is not native to that blockchain. These are usually called non-native tokens. Native Tokens and Forks The token of a forked blockchain is also 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 version it was forked from. 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). 1 By the old 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 Dec. 28, 2023, USDC was native to Algorand, Arbitrum, Avalanche, Base, Ethereum, Flow, Hedera, NEAR, Noble, OP Mainnet, Polkadot, Polygon PoS, Solana, Stellar, and TRON. 2 Wrapped bitcoin (WBTC) is a bitcoin that has been tokenized (given a token) on the Ethereum blockchain via a smart contract. The 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. 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 to the owner. 3 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. 2 If USDC is native to Ethereum, then WBTC is native to Bitcoin. What Is a Coin vs. a Native Token? Some use the term "coin" to refer to a cryptocurrency. A native token is a token created on the blockchain it is used and stored on. Is Ethereum a Native Token? Ethereum's token ether (ETH) is a native token because it was created for the ecosystem and used in it. 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. The Bottom Line Native tokens are created and stored on a specific blockchain or its supporting layers. This definition differs from past definitions because the industry is still in its infancy and changing. The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency. Correction—April 11, 2024: This article has been corrected to state that ADA is the original token for the Cardano blockchain and not the Solana blockchain. Compete Risk Free with $100,000 in Virtual Cash Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you're ready to enter the real market, you've had the practice you need. Try our Stock Simulator today >>