Utility tokens, also known as product tokens, or user tokens, are digital assets that give its owners access to network services and products. Unlike security tokens, utility tokens do not give the right to own shares in the company.
Most product tokens are based on the Ethereum blockchain, but other platforms can be also used. User tokens should not be confused with security tokens (Bitcoin, Ethereum, Litecoin, etc.).
Utility tokens are often used during an initial token offering (ICO) and are offered to the community of a particular project, usually within a few rounds. The holders of this kind of tokens receive the right to use the services and products associated with the project with early access rights, and sometimes other privileges.
However, utility tokens find their application outside the ICO. In the event that a company whose activities are connected with the blockchain needs additional financing, it may decide to use utility tokens for this purpose.
User tokens may not be related to project financing, for example, when they are earned in a computer game and allow you to get some bonuses in it.
A classic example of a user token is Basic Attention Token (BAT), which is used by the Brave browser as part of the advertising service platform.
In the narrow sense, BAT is an ad system based on a blockchain network, the purpose of which is to change the way ads are presented. BAT improves its effectiveness while creating a new unit of exchange between publishers, advertisers, and users.
The value of the token is based on the user's attention: he can block and view ads by spending or receiving tokens. At the same time, advertisers get the best return on investment through better targeting.
How utility tokens are issued and used
Utility token emission can take place in a centralized and decentralized mode.
It is obvious that the issue of product tokens accompanied by their correct delivery to users who find for themselves the value and usefulness of tokens can significantly modify the business. These tokens are used, as a rule, in the network created by the issuer, however, they can be used in several networks or ecosystems.
Utility tokens allow customers to consume goods or services. And although many people invest their money in them expecting their value to increase as the demand for a product or service grows, in the strict sense, utility tokens cannot be perceived as securities.
If a company, which is built on the basis of the blockchain network, has decided to raise money for its financing, it can conduct an ICO and issue a certain number of product tokens. Issuing utility tokens through an ICO allows the company to obtain funds without losing its independence.
Please note that IQ Decision UK specialists provide comprehensive legal advice on issuing utility tokens, and we are ready to accompany the client at all stages of the ICO or registering a company with the ICO.