Utility Token
Beginner
Utility tokens, also known as user tokens or app coins, are digital tokens issued through a blockchain network, often via an initial coin offering (ICO), initial exchange offering (IEO), or other type of token generation event (TGE). Unlike traditional currencies such as dollars or euros, utility tokens are designed to serve a specific purpose within a decentralized platform. They provide users with access to a range of services or features, acting as a kind of digital key to unlock functionalities within a particular blockchain project.
Key Characteristics of Utility Tokens
1. Access to services
The primary purpose of utility tokens is to provide access to a blockchain platform's goods or services. These can include anything from utilizing a decentralized application (DApp) to accessing specific features within a blockchain ecosystem.
2. Not an investment
Unlike security tokens, utility tokens are not considered investments in the traditional sense. Instead, they represent a means of transacting within a specific blockchain environment.
3. Intrinsic value
The value of utility tokens lies in their utility within a particular ecosystem. As demand for the associated services or features grows, the perceived value of the utility token is more likely to increase.
Utility Tokens vs. Security Tokens
It's important to understand the differences between utility tokens and security tokens, as they serve distinct purposes in the world of blockchain and cryptocurrencies.