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 t𝕴o several blockchai🏅ns or supporting layers.

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 seve𓃲ral 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 澳洲幸运5官方开奖结果体彩网: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 n﷽amed 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 i🀅t 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.

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 WBܫTC 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.

The Bottom Line

Native tokens are created on a specific blockchain or its s🌟upporting 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  for more info. As of the date this article was written, the author does not own cryptocurrency.