• BBCA

What are Utility Tokens?

by Luca Andrade

With all the 2017 Bitcoin buzz you are sure to have heart the word ‘token’ in the news at some point in the recent past. Token this, token that, different projects have tokenized different things running all the way from luxury apartments in New York City to clean energy so you can sell the energy you create with your solar panels to your neighbor. But after all the hype and the noise, what exactly are tokens and more specifically what are utility tokens?

The first point we must touch is the difference between coins and tokens. Not all blockchains are the same and each of them aims to take a part in the “blockchain future” of our societies. In a nutshell; coins are a form of money and tokens may serve broader functions. Blockchains like bitcoin and litecoin are meant to be used as a store of value a.k.a. money, (sort of) like their fiat counterparts like USD or EUR. Tokens, on the other hand, tend to do a little more than “just” being money.

There are different types of tokens; utility and security. Security tokens are assets particularly similar to securities as we currently know it. Security tokens may entitle you to equity in a firm, dividends among other things, in a way much like a normal stock exchange, just now in a blockchain.