A utility token is a cryptocurrency that provides users with access to services or features within a specific blockchain ecosystem, without representing ownership or investment.

Understanding Utility Tokens

A utility token—often called a ‘user token’—is a type of cryptocurrency that grants holders access to services or features within a specific ecosystem. Think of it as a key, unlocking doors within a decentralized platform or application. These tokens are integral to the economies of systems like DEXs, metaverse platforms, or Web3 applications.

Acquiring Utility Tokens

How do you get your hands on these tokens? They’re typically distributed through Initial Coin Offerings (ICOs) or Initial Dex Offerings (IDOs). Once you have them, they offer privileges like service access or fee discounts. Some even allow you to have a say in the future of a decentralized application (dApp) through voting on proposals.

Utility Token Standards

The go-to standard for these tokens is the ERC-20, developed on the Ethereum network. It’s a template that ensures consistency and compatibility across the board.

Utility Token Examples

Utility vs. Security Tokens

Don’t confuse utility tokens with security tokens. The latter are investment tools, often representing a real-world asset and ownership in a project. Utility tokens, however, are for use within a blockchain ecosystem and don’t signify ownership.

ERC-20 Tokens

ERC-20 tokens are a technical standard for fungible tokens on the Ethereum blockchain. They’re smart contract-based and track tokens created on the network.

What’s a Hash?

A hash is a unique string that secures data against unauthorized changes or access.

Depegging in Cryptocurrency

When a stablecoin’s value shifts away from its pegged asset, that’s a depeg. It’s a critical event for any pegged cryptocurrency.