Utility Token

What Is a Utility Token?

Utility tokens grant their holders certain privileges and access to services. Each utility token is unique to its ecosystem and cannot be mined. Instead, tokens are typically pre-mined by the team behind the project and distributed through specific methods. 

Utility tokens are commonly issued at an initial coin offering (ICO) in exchange for investors’ funds for the development of a project. However, because they don’t grant ownership in the company, utility tokens are not considered investments. Hence, they are largely unregulated. 

A utility token can serve just about any purpose a company or developer wants it to. In most cases, this type of digital asset allows its users to access the future products and services of a certain company. In other cases, they can work like reward points for users to exchange for products and services. 

Examples of utility tokens: Basic Attention Token (BAT), Filecoin (FIL), Siacoin (SC)

Key Takeaway

Utility tokens are a type of cryptocurrency that has specific use cases within a blockchain network ecosystem.

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