A utility token represents a category of cryptocurrency, the primary feature of which is that the holder can get access to certain products, services, or features through the blockchain-based ecosystem. As opposed to coins like Bitcoin or Ethereum, which are primarily used as digital money, utility tokens are tailored for the use of particular project or platform.
To illustrate, a decentralized exchange can give out a utility token through which the holder can pay lesser trading fees or can vote on the next system update. In another scenario, a blockchain game might give out a token for users to buy in-game items or access certain features. Generally, the value of a utility token will fluctuate according to the demand and the level of activity in the underlying platform.
What’s more, utility tokens should not be interpreted as owning or having a stake in the company, they are mainly non-investment securities that serve as functional tools. They are ways projects can establish internal economies within which the participants can directly exchange value without the need for traditional intermediaries.
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The versatility of utility tokens has, in fact, been a major factor that their being one of the topmost kinds of digital assets in the cryptocurrency sector. Nevertheless, the corresponding legal situation could differ from one country to another based on the manner of use and promotion of the tokens. In layman’s terms, a utility token is the “key” that opens the doors to a blockchain’s services or products.