What are Utility tokens?

14 Dec, 2019 Colin Baseman

Utility-tokens are sometimes referred to as user tokens or application coins. These assets provide the owner with access to a service or product in the future. Blockchain projects are often funded using utility tokens. Some equate these assets with securities, but usually, they are not used for investment purposes.

Advantages of Utility tokens

Crypto assets of this type are very popular. They have such advantages:

  • Access to Issuer services. Some services are provided only in the presence of company tokens. Or the use of tokens allows you to get clear advantages.
  • Ease of emission. The developers are usually are not required to register in the state or other bodies, to collect signatures etc. So for a company, it is easiest to get financing through Utility tokens.
  • Market valuation. The asset price is not fixed. If the project successfully develops, its tokens can grow in price many times, providing their owners with additional profits.
  • Legality. From the position of SEC, Utility tokens are completely legal.
  • Ease of use. Useful tokens do not require official confirmation. They can be used immediately after receiving the keys.

What is important to know about Utility-tokens

Tokens are used to provide users with access to the services of the blockchain platform. They do not provide ownership rights to land, assets or property of enterprises, do not promise benefits, are not substitutes or analogues of loan agreements. It is noteworthy that about 120 of the 200 most valuable cryptocurrencies are Utility. As you can see, they are very popular.

The cost of the token during the initial placement of coins is set by the Issuer. To do this, he can order an economic analysis or arbitrarily choose the desired price. When a cryptocurrency enters the market, its value changes based on the ratio of supply and demand. If the startup meets the needs of users, the demand for tokens increases, which leads to an increase in the price of them. In the article "Investments in ICO. Who needs it?" you can explore more about the benefits of these assets.

Notable examples of Utility tokens are Ethereum, Stellar Lumens, NEO Gas, NEM and others. The first is activated when using smart contracts on the blockchain. Stellar Lumens is used in their system to pay for transactions. NEM and NEO Gas operate on the same principle as ETH. The SEC does not regulate the issue, sale or resale of Utility tokens.

Utility tokens are very functional. They can be used for a variety of purposes. Why not buy several different types? This can be done in the hope of an increase in the rate and further resale at a higher cost, as well as for exchange in the future for various goods and services.