Understanding Coins: Security & Utility Tokens

There are more people each day stepping into the Blockchain industry. While cryptocurrency is still in the early phases, this spikes the number of questions asked about how Cryptocurrency can be used as an investment and how it would be an advantage for you to understand more about cryptocurrency.

There are primarily 2 types of tokens you’ll likely see in the market; Security tokens & Utility tokens. You’re probably having an image of how complicated this is turning out to be, in this article, we will decipher this topic into bits and pieces.

So What Are Utility Tokens?

Utility tokens are digital tokens that are issued in order to fund developments for future access to the products and services offered by a company.

Similar to video game stores, they might accept orders for a video game that might release months later. A startup company can create utility tokens for the service or product they’re developing. From a different angle of understanding, you can also think of it as a Crowdfunding platform (GoFundMe, Kickstarter & Indigogo — These are the top few) where the buyer of a utility token has paid the issuer of the token money NOW so that the company can develop a product/services that the buyer of the token can LATER redeem.

What Are Security Tokens?

Security tokens are digital assets that represent the stake of an external enterprise and can be traded. Therefore, they are subjected to the federal law that governs these securities.

To give you an idea, let’s draw an example. If a company wants to distribute shares to investors, these Security tokens can be designed to come with all of the same benefits— notably, voting rights and dividends.

Conclusion

While Security tokens and Utility tokens are often being misunderstood, the functionality and intend are absolutely different. We hope this article provided you a strong foundation in distinguishing both of the tokens.

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