What is Utility Token in Cryptocurrency?
There are many different types of tokens in the cryptocurrency world. One of them is tokens called utility tokens. A utility token is a type of token that is used within a platform or network and provides a specific function or service. For example, on a social media platform, the utility token can be used for actions such as posting, giving likes or showing ads on the platform. Utility tokens are usually issued and sold to investors through an ICO (Initial Coin Offering) or IEO (Initial Exchange Offering). The value of utility tokens depends on the balance of supply and demand and the popularity of the platform or network.
What are the advantages of utility tokens?
Utility tokens have many advantages for both platform owners and users. Platform owners can fund their platforms, expand their user base and build loyalty with utility tokens. Users, on the other hand, can participate more on the platform, earn rewards and enjoy discounts thanks to utility tokens. Also, utility tokens can be traded on cryptocurrency exchanges and converted to other cryptocurrencies.
What are the disadvantages of utility tokens?
Utility tokens also have some disadvantages. Utility tokens are generally unregulated and do not provide legal protection. Therefore, investors who purchase utility tokens may suffer if the platform or network fails, gets hacked or is scammed. Utility tokens are also subject to market fluctuations and may lose value. The use of utility tokens also depends on the rules of the platform or network and may change.
What are examples of utility tokens?
Examples of utility tokens include:
- Basic Attention Token (BAT): A utility token used inside the Brave browser and given in exchange for users watching ads or donating to publishers.
- Binance Coin (BNB): It is a utility token used within the Binance exchange and given in exchange for users to download transaction fees or provide early access to new projects.
- Chainlink (LINK): A utility token used inside the Chainlink network that allows payments between people who provide or request oracle services.