Utility Token
Tokens that are designed specifically to be able to help people use something.
What Is a Utility Token?
Utility tokens in crypto refer to
blockchain-based tokens that have a specific use and offer utility. They are created on the blockchain and are native to the platform they are used on. They are also not considered to be financial instruments, meaning that they are not subject to the same regulations as securities.
Utility tokens are typically issued during an
ICO,
IDO or
IEO where investors can purchase them in exchange for cryptocurrency or fiat currency. They are used to incentivize users to participate in a platform and to power the network. For example, a platform may require users to hold a certain amount of tokens in order to be eligible to participate in certain activities or to access certain features. Utility tokens can also be used to reward users for completing tasks or providing services on the platform.
The use of a utility token is limited to the particular ecosystem that it is designed for. For example, one day, Uber could have its own utility token which people would use to pay for rides on the Uber network. Utility tokens are not designed as investment vehicles.
The
SEC is constantly on the watch for new utility tokens and security tokens. The regulator uses the Howey Test to determine whether or not a particular token is classified as a
security token or a utility token.
Utility tokens are not subject to the same regulations and requirements that security tokens are, because they are not considered to be investment contracts. One of the most well-known examples is
Filecoin, which has been designed to help users use the Filecoin decentralized data storage platform.
Examples of Utility Tokens
0x (ZRX)
0x is an
open-source protocol that enables the peer-to-peer exchange of
Ethereum-based tokens and assets. It is designed to provide a decentralized, trustless exchange for
ERC-20 compatible tokens.
Augur (REP)
Augur is a decentralized prediction market platform that allows users to create predictions and wagers on the outcome of real-world events. The Augur token (
REP) is used to reward market makers who accurately forecast the outcomes of events.
Golem (GNT)
Golem is a decentralized supercomputer that allows users to rent out their computing power to others in need. The Golem token (
GLM) is used to pay for services and resources on the platform.
Basic Attention Token (BAT)
The Basic Attention Token is an Ethereum-based token used to monetize user attention on the Brave browser. Users are rewarded with
BAT tokens for viewing ads in the Brave browser.