Using tokens is one of the significant factors, out of the many, which have contributed to the success of blockchain technology.
Tokens are relatively easier to create when compared to coins. Coins require their own blockchain to operate. While tokens operate on pre-existing networks which make them faster, easier, and far more pocket-friendly.
This article will delve deeper into the concept of tokens and help you gain a clear picture of a utility token. Also, you will be learning about how utility token works.
What is a Utility Token?
A utility token has a wider functionality than a coin. Tokens have value, but they cannot consider money as a coin. It can later use for purchasing a good or service provided by the issuer of the cryptocurrency. Moreover, utility token can employ as a new way of fundraising for the mass wave of blockchain start-ups that have been emerging in recent years. They have the opportunity to raise funds without comprising their independence.
Crypto coin and Token difference
Most people ask about the difference between tokens and crypto coins. The main difference between a cryptocurrency and a token is that cryptocurrencies are the native assets of a blockchain. Whereas tokens are built on an existing blockchain and use smart contracts.
Types of utility tokens
More knowledge about the types of tokens can help us to understand the concept of a utility token better. So, we review four main types of tokens.
- Payment tokens
- Utility tokens
- Security tokens
- Non-fungible tokens
Payment token
The payment token is the unique string of numbers or a secure identifier generated from a PAN. These kinds of tokens are automatically issued in real-time and used online in predefined domains or payment environments. Also, you should know that a payment token is different from a digital payment token. A digital payment token refers to any cryptographically-secured digital representation of value that is used or intended to be used as a medium of exchange.
Utility token
As we talked about this type of token at the beginning of this article, a utility token is a special type of token that helps in capitalizing or financing projects for startups, companies, or project development groups.
Security token
A security token is essentially a digital form of traditional securities that provides two-factor authentication for a user to prove their identity in a login process. Security tokens act as an electronic key to access something. Some tokens may store cryptographic keys that may be used to generate biometric data or a digital signature, such as fingerprint details. Some may also store passwords.
Non-fungible token
A non-fungible token is a unique and non-interchangeable unit of data stored on a digital ledger. These kinds of tokens are not interchangeable and each of them represents unique assets. NFTs are not divisible and have their value as a whole entity. While fungible tokens are easily interchangeable although there is no additional value associated with interchanging fungible tokens.
Security token VS Utility token
There are primarily two types of tokens, namely Utility tokens and Security tokens. A utility token is for direct investment. As I mentioned above, it is mainly created for payment within a particular blockchain ecosystem. On the other hand, security tokens are digital assets that derive their value from an external asset that can be traded.
The main difference between mentioned tokens depends on their use and functionality. Utility tokens help fund ICOs and create an internal economy within the project’s blockchain, such as CPS. While security token is created as investments.
In the following table, we represent several differences between a utility token and security token:
| Utility Token | Security Token |
|---|---|
| It has access to utility or protocols | Asset ownership |
| The value of the utility token does not relate to the current status of the valuation of the company. | Token value correlates directly to the valuation of the company issuing the token |
| Utility token developed under the existing blockchain like Tron, Ethereum, and… | Security Tokens are developed under the existing blockchain. |
Cryptostone Token
Cryptostone is a disruptive innovation and a fully anonymous and No KYC blockchain financial ecosystem. With Cryptostone people can exchange and trade crypto or security tokens with less fee.
Cryptostone token features
Now we have seen a brief overview of the Cryptostone token and its benefits for the users. Here are several features of Cryptostone:
- Users receive a fee discount on CPG transactions.
- There will be a discount on purchases or trades in the ecosystem.
- By trading Security tokens and stock with Cryptostone tokens, users can enjoy getting a commission discount.
- With this no KYC platform, nobody has to reveal their identity. Cryptostone doesn’t have any geographical limitations.
- There will be a potential increase in Cryptostone value due to project growth.