What is a Utility Token?
Utility tokens in the cryptocurrency realm are blockchain-based tokens that provide specific purposes and functions. They are native to their platform and provide specialized utility functions. Unlike securities, utility tokens are not categorized as financial instruments and do not face the same regulatory obligations.
Utility tokens are typically distributed via ICOs, IDOs, or IEOs, with investors able to purchase them with cryptocurrency or fiat currency. These tokens are used to incentivize platform participation and power the network.
For example, a platform may require users to have a specific number of tokens to participate in particular activities or access certain features. Utility tokens can also be used to reward users who complete activities or offer services on the network.
A utility token can only be used within the environment for which it was built. For example, Uber may one day have its utility token that customers can use to pay for rides on the Uber network. Utility tokens are not intended as investment instruments.
